There was weakness carried over from yesterday as the grains started break overnight and followed through with limit down moves in wheat and corn and soybeans down close to the limit –47 cents/bu. This lead to spec selling through sell stops being hit as Dec'07 cotton futures fell to the lowest levels in over 3 weeks.
Since setting the recent high at 67.40 last Thursday, the market tested and failed on Friday with quarter ending profit taking and has not been able to recover. The grains and other commodities also played out similar patterns as the dollar finally found a bottom to close higher on the day.
Volume was strong with 30,000 futures and 16,000 options as the specs reduced their spec longs to only 26.4%. This was due to the strong rise in open interest as well as profit taking on Friday. Either way, after today, it looks like the specs are in a pull back mode as they will hesitate to defend the market until we can technically make a new stand in the market.
With China on holiday and hedging pressure coming in from all the Northern Hem commodities, we should see the market try and test the lower 60's over the next several sessions and depending how the outside markets behave, we might be in for a deeper correction.
Technically, the market finally reacted to the overbought signals based on the 3rd quarter profit taking that entered the market. The heavy support at 65.00 was broken as well as the 9-day moving average. We also broke the bottom line of the upside trend channel that has been in place since this rally started 10 weeks ago.
This should lead to another test of the lows with the next major support line near 62.70. The technical picture looks negative and the fundamentals are very bearish based on the lack of demand, we are getting cooperation from outside commodity markets so this could be the beginning of further retracement from the recent highs in several of the commodity markets.
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Telangana State Industrial Infrastructure Corporation Limited (TSllC Ltd)")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Taiwan Textile Federation (TTF)")
