Cotton prices reacted to the early stability in stocks and the firm grain markets by moving up, not only when grains were stronger in electronic trading, but again when they continued to show additional strength once outcry and options got underway. Again wheat was the leader on the upside as it again went limit bid, but eventually so too did beans, and it was that kind of strength that spilled over into cotton. March cotton reacted by moving sharply higher on a couple of waves of buying, ultimately reaching highs of 69.89 & 69.90, the highest since Jan 23rd.
These highs didn’t last long though, as once grains began to back off, so did cotton. I guess the game of follow the leader is still intact. However, the profit taking stirred by beans coming off their limit seems to have been prompted by rumors that the government may decide to defer the Ethanol directive. The response was for grains to back off so much so that beans closed lower as did corn. Cotton responded in kind and dropped over 100 points from its highs.
The March/May spread traded between 181 and 189, and the March/Dec between 822 and 860. Tomorrow the Goldman roll begins in earnest. And with over 1000,000 contracts still open in March it is thought that those spreads will remain very active and widen out further over the course of the next five days. First notice day is 11 trading days away. I agree and suspect, especially with the market closing on a vulnerable tone note should
Tomorrow the weekly export numbers get released and the Chinese New Year holiday begins. Then on Friday the USDA crop numbers get issued. Again, be mindful not only of cotton, but what the leaders (grains) show. March options trade until the close on Friday and then the NCC issues their planting intention report. I think somewhere around 12 million acres is expected, down from last year’s estimate of 13.6. Since it comes out after the close any surprises will set the tone for trading next week, but it’s always a good idea to keep an eye out for any late “Clarence Beeks” maneuvers.
The charts do not look good. March could easily break lower if it takes out 6650. Now, I know we’re still a ways away from there, but these markets are nervous and jittery. It therefore, might behoove you to take out protection against longs by buying puts (or calls) if you are nervous. That way you can have an insurance policy if things get real crazy.
News: Bush Says He Might Veto Farm Bill
Personally, I think a melt down is still possible and if one comes that’s when I will get aggressive about owning Dec calls. Otherwise I’m going to stay pretty neutral for the time being. Near term, I look for a range in March between 67.00 and 69.50.
Support: 6830, 6770, 6735-6720, 6677-6650
Resistance: 6910-6940, 69.90-7000, 7085
Si quiere más información, por favor contáctenos,
El equipo de Brokers de Futuros USA
Fuente: MF Global
©2007 Jurgens Bauer & Associates all rights reserved.
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