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Good volume in trade again
06
Aug '08
Another wild day as we bounced off the lows and even hit limit up at one point before falling all the way back to unchanged. The string of uneventful, low volume, narrow trading ranges has been broken for the third day in a row as we had good volume again with 21,000 futures and 23,000 options. The grains were weak overnight which pushed NY to almost 12 month lows at 68.20.

However, with good business overnight, the market found support back to unchanged. Once the grains opened only slightly lower, there was some panic short covering which ran into some buy stops and cotton found limit up within almost 5 minutes after Chicago opened.

The move back above 72 cents slowly uncovered some trade selling and eventually pushed NY all the way back down. The FED decided to hold rates unchanged which supported a strong stock market and even allowed the USD to make 3 month highs.

There is still concern over inflation and slow growth over the next several quarters which will keep the economy cooled off and possibly allow commodity prices to fall further.

Technicals continue to look negative in the short term, but after the limit up bounce, it is obvious that the fundamental picture is looking better and good size demand was uncovered at these price levels. Along with a hot dry August left to grow the Northern hem crop, there is a good chance the market will continue to find support under 69 cents.

If that is the case and we can hold that area on a few more tests, we should try and climb back and test the upper end of the range at 72 cents scale up. However, if the commodity complex continues to slide lower, Z'08 will have trouble sustaining rallies and should move lower into expiration.

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