Another volatile day in commodities as the market prepares for a long weekend and uncertainty about Tropical Storm Gustav set to land next week. The truth is, commodities as well as the stock market and dollar seem to have run out of steam as we trade in narrow sideways ranges.
The crop is not in bad shape and most crops are late which are in the path of the storm, so there does not appear to be any significant danger. Volume was a bit above average at 13,000 futures and 7,000 options, but open interest continues to look weak and the COT (page 2) shows slight reductions compared to last week.
Month end today was not very strong as we continue to get good scale up selling near 71 cents as the market tries to make a case to go higher. The range remains in place and oil has been struggling near 120 to go higher. Grains and metals look like they are stuck as well since most people were squaring up positions going into the long weekend.
There was some friendly option buying in certain bank stocks which shows that some investors are willing to go long selectively. The broader markets continue to look turbulent going forward as we head into September and the harvest of the northern Hemisphere crops.
Technicals turned friendly last week as MACD started to cross higher in cotton and soybeans made a nice run to the upside. Although volatile, the market is well traded in the range. We ran through some correction, but buying interest would come through to prevent the market from falling off.
Considering the low open interest in cotton and the lack of demand, cotton feels like we may continue in a sideways trading range up to heavy resistance at 72.00. This will depend on how much the rebound in outside markets can follow through, but the short term upside looks limited and we may see a correction in cotton if we cannot break through 72.00 cents.
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.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "UBM China (Shanghai)")
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