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Cotton market closed on happy note

May '07
Finally..... a friendly day on the chart where the market closed higher. We started the day with the market already showing new contract lows electronically. The open outcry also tested some lower levels setting a new contract low of 47.78, but started to get some strength based on some friendly options where volumes of Z'07 65 calls were being bought around 30-40 pts.

This pushed the market up to 48.45, but it quickly ran out of steam and came back down to 48.20 where it spent most of the day near unchanged until some late short covering on the close rallied us up 40 pts. Combined futures volume was estimated at 18,000 and options over 20,000.

Decerts were made today of 16,500 b/c bringing the total down to 712,701 b/c, but there is still 7,000 awaiting review. Open interest rose yesterday with the market lower showing that there could be some new shorts entering the market and specs could have gotten shorter.

The market was oversold and looked like it was ready for some short covering. However, even the bounces are not coming close to upside resistance and it seems we are easily breaking downside support.

At the moment with specs showing room to sell and the demand not very strong, hard to say that the low is going to hold. Have to hold this area the rest of the week in order to start putting together a good technical picture, but the Mavs did win last night so anything is possible!

The Wednesday session made a new contract low, then climbed and settled close to the high. Technically we have reached an area on the chart that seems to be very oversold, but some short covering was seen in today's session.

Options activity was quite busy today. Estimated volume included 12,900 calls and 7,554 puts. One of the merchants was seen buying 1,000 December 51 puts and selling 500 December 60 puts collecting between 390-385 points. The same group was seen buying 900 December 65 calls for 43.

Click here to view graphical presentation:


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