July cotton, which goes into delivery Monday, soared to the highest level in five months. On the weekly charts, Julys high was the highest for a spot month since the last week of December. July has now had a 1,040 point run in six weeks. Decembers close was the highest since Sept. 12th. Some months had limit up prints for the first time in several years.
Despite wide spread welcome rains across most of the cotton belt, early selling on the ICE could not gain a following. Pit trading opened on its lows for the session. The resulting technical implication was a successful test of recent lows setting up a bullish outside range day to the upside.
ICE trading tested yesterdays lows and held, Pit trading opened on the lows with commercials on both sides. As prices started to move up, bullish options kicked in. As yesterdays highs fell fund buying came out of the woodwork and stops were triggered in all months.
A steady stream of strength in December came from aggressive fund buying of Dec/July switch and commercials bullish option strategies. The Dec/July switch, which traded as low as 425 on Monday, hit a new high of 600 points today. Futures volume today was estimated at 34,712 in the pit and 25,895 on the screen.
Probably 75 percent of the option strategies were bullish today. One MMM who sold thousands of Dec 50 puts at the bottom of the market just as the blending process was beginning, bought them back today. Very possibly for the same MMM,there were several thousand Dec 55 and March 58 puts sold today giving strength to the back months. Option volume was a brisk 9,800 calls and 25,500 puts.
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