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Cotton market bullish

11
Apr '08
Quite a busy session started off Thursday as a roller coaster action was seen on NYF cotton market. Follow through buying was seen over night based on yesterday's firm close and the general commodities strength. Over 7,000 contracts in options were traded within one hour of the pit open, with the bulk of them being bullish.

Major trades were buying in N'08 90 cent calls, Z'08 130 cent calls, N'08 90/110 cent call spreads and selling in Z'08 60 cent puts. These activities pushed the market higher to reach today's high.

As the dollar firmed up and grains traded lower, cotton lost its strength and turned direction quickly to trade at the lower area of today's range. It then slipped into a quiet session and settled the day with a decent gain of 90 points across the board.

This morning's U.S. export report was showing decent numbers as overseas mills purchased quite some inventory when NYF retraced to their acceptable price level, and the delayed data started to come in. New sales were well improved from the week before with 493,600 running bales upland and pima combined.

The major buyers were China with a whopping 290,100 bales, Indonesia with 40,600 bales and Vietnam with 26,100 bales. Shipments were 299,500 running bales combined with 125,900 bales leaving for China and 22,000 bales leaving for Turkey.

The technical picture continues to be friendly. RSI is at a well balanced 52% and the May contract settled above the 50 day moving average. We have bounced back over 7 cents from the low at 67 cents created on the first day of this month. There's good reduction in the K'08 open interest, which settled at 65,000 contracts as of end of yesterday.

Spread between the May and July contracts has come in a bit. Though fundamentally bearish, cotton futures prices are holding firm in the old game of joining the flow and following the outside commodities market. Tomorrow is the expiration day for K'08 options and re-analysis of market strategies is expected after that.

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ECOM USA Inc


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