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ECOM daily cotton markets recap

May '07
It was a crazy day that started out higher electronically and never looked back. The volume of futures was estimated at over 55,000 contracts and 35,000 in options. The locals went home long last night and were anxious to try and find buy stops early and this lead to some short option and futures covering which propelled the market to the highest level since April 30th.

However, the close also ran into trade and spec selling that might have lead to some local profit taking and the market gave up 100 pts to close back near the trading channel we have been stuck in for the month of May roughly between 47/49 c/lb.

There seemed to be very aggressive selling on the open which ran into the stops, but we could not determine any fundamental reason as we still have the large redemptions which will now definitely take place this week.

We are now estimating between 5-7 million bales possibly and this will create heavy trade selling scale up above 50 cents in July. Still hard to determine how we will be able to see N'07 mount much of a rally considering the need to hedge so many redemptions.

Demand has been good and especially on Monday and Tuesday on the last break in NY. Export sales come out tomorrow and we will see if there is some more fuel for the bulls to keep this rally going.

Technically we were way overdue for a correction after falling 865 pts from the N'7 highs of 55.50 back on the 30th of March. This highs today represented a 40% retracement, but did fall back into our 2-week trading range on the close. We filled the gap above the market (49.24/25), but now we made a new one below the market on the open (47.90-48.40).

We closed well above the 9-day moving average (48.38) and the market certainly looks healthier from the technical side.

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