Another quiet day as the market traded lightly in a narrow range. This is a small victory considering that the market managed to trade 2 days without setting a new contract low. Volume was estimated at a combined 5,000 contracts with 6,000 calls and 7,000 puts.
Electronic volume actually exceeded pit volume for the first time as many locals were absent today enjoying the nice weather in NY. USDA is releasing the S&D numbers for May next Friday and we are expecting very small changes with possibly a cut in U.S. exports to 13 million bales.
We are holding this sideways pattern for the short term and the market does seem to want to hold at these levels as we are even getting demand for new crop cotton with Z'07 trading near 53.00 cents. Cotlook released more forward quotes today so it looks like the blending of the two indexes will begin next Friday if there are no complications.
This could trigger a large redemption from the loan and maybe a rally to go with it. The loan is currently 10.157 million bales compared to 6 million at this time last year. The pre-blend redemption last year freed up 3.5 million bales and the estimates for this year are from 4-6 million bales.
Technically the moving averages still are far apart, but the RSI continues to be signaling an oversold market and the continuous spot month chart is showing a double bottom considering where May reached this week near 46 cents. We are hoping that this is the beginning of muchneeded correction but too early to say as the market still does not have any heavy volume buyers to signal an end to this sell off.
Specs position on the commitment of traders report only went slightly shorter this week from 9.1 to 9.9% so we may still have some selling pressure to deal with next week.
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