Wednesday, July 23, 2008

Dec’08 open interest this morning was 164,066 contracts, down 1,930. Total open interest was 218,566 contracts, down 1,488. Certificated stocks total 1,725,824 bales, up 420 bales from the previous report. There were 17,185 bales awaiting review. The 2007/08 North European A-Index was down 65 points at 77.25 and the B-Index remains unquoted. The Far Eastern A-Index was down 90 points at 76.10. The 2008/09 Far Eastern A-Index was down 75 points at 78.35.

As the option pit opened, Dec was trading at 71.50. Dec had a fairly narrow trading range so far this morning with a high of 71.94 made around 7:25AM and a low made around 2:40AM. Dec had opened this morning at 71.60. After the options started trading, Dec came under some new selling pressure with Dec moving from 71.56 down to a new low of 70.78(-78). In Chicago, the electronic grain markets ended their early morning session very weak, with U-Soybeans down 35 ¾ cents, U-Corn down 21 ½ cents, and U-Wheat down 12 ½ cents. Crude Oil was also weak this morning trading down over $2.00 per barrel. The Dollar was a little firmer, trading up about 10 points per the Dollar Index. The Cotton market again was suffering from very weak outside markets. Dec was finally able to stabilize at this level. By 9:50AM Dec had slowly worked its way up to 71.45. Just before the start of grain trading in Chicago, Dec had slipped back down to 71.02. Dec then chopped between 71.02 and 71.35. The grains had opened weaker than were the electronic session had ended. Around 10:40AM the selling picked up when Crude oil collapsed back down over $2.50 per barrel after its energy stocks report was released. Gasoline stocks were higher than expected and oil stocks were lower than expected. Oil had earlier recovered to less than a $1.00 lower. The Dollar continued to strengthen this morning, now trading up about 35 points. However, Dec was able to hold 71.00, and Dec then bounced back up to 71.20. Dec continued to attack the support just in front of 71.00 as persistent selling continued to hit the screen. After about twenty minutes of attacking this level, some short covering and light new buying bounced Dec up to 71.40. Dec’s recovery stalled at this level. Dec then slowly ground its way back down to 71.01. The selling again started attacking the support at 71.00. About 175 Decs were wanted at this level. Dec again held this level. About twenty-five minutes later Dec had moved back up to 71.65. Some support may have come from a recovering oil market where Crude oil was down only about $1.50. Some profit taking then eased Dec down to 71.50. Around 11:50AM another wave of buying hit the screen and rallied Dec from 71.50 on up to a new high of 72.29(+73). Some additional profit taking pushed Dec down to around 71.98. With Chicago grains staging their own strong recovery, Dec rallied back up to another new high of 72.50. When Dec hit this level some heavy Spec Buy Stops were touched off propelling Dec up another 100 points to 73.50(+194). After the stops were finished, Dec quickly slipped back down to 73.08. Dec held this level and then another wave of outright buying propelled Dec up to a new high of 73.70(+214). With the buying easing up, Dec slipped back down to around 73.30. Dec then chopped erratically between 73.30 and 73.65. The grain markets had rallied back to positive territory but ran out of steam and then slipped back into the red. This seemed to halt for now any further advance in our market. With the grains weakening further, new selling hit our market and Dec slowly stair stepped back down to 73.05. This level was reached around 1:10PM. Dec finally was able to stabilize at this level. Dec then started another move higher and about fifteen minutes later Dec had reached 73.50. Resistance stared to increase at this level and higher. Dec’s upward momentum was stalled and Dec fell back to 73.17. Dec then gyrated mostly between 73.20 and 73.50. Just before the one minute settlement period, Dec broke down to 73.05. During this period Dec chopped between 73.05 down to 72.75. In Chicago, the grains had a very late and sharp sell off. This probably prompted some long liquidation in our market. After this period, Dec ranged from 72.85 to 73.49. Dec’s last tick of the session was at 72.95. Dec still closed firm and in the top 1/3 of today’s 292 point trading range, settling at 72.92(+136). The Oct/Dec straddle traded about 383 times, ranging from 295 to 270 points. The Dec/Mch straddle traded about 664 times, ranging from 539 to 550 points. Estimated volume was 13,600 contracts. Previous day’s volume was 15,006 contracts. Tomorrow morning the USDA will release its weekly US Cotton Export Report.

  

Daily Moving Averages:	Dec	Oct
3 Day Average	72.42	69.60
7 Day Average	73.02	70.18
21 Day Average	75.18	72.12
40 Day Average	75.94	72.59
50 Day Average	76.55	73.21
100 Day Average	79.89	76.83
RSI:	42.5	43.9

  

Please address comments to Weil Brothers-Cotton, Inc., at weilbros@weilbros.com.

Additional Market Information, including Cotton Options, can be obtained from The New York Board of Trade.

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