Cotton: an inside day with light volume, Aug. 23

Cotton prices pretty much completed the day’s range in the first 15 minutes of trading today. As such, there isn’t much to report. Prices pushed below 5500 and found support at 5480. It doesn’t surprise me that prices eased off somewhat following yesterday’s action. Options were quiet and the tone seemed calm.

Exports are due out in the morning. No surprises expected.

Look for the range to continue between 5400 and 5600, (+/-50 points) basis December. It is likely that should 5470 support give way, another test of 5400 might be in store. What will be most interesting is the response if that happens. Are there stops accumulating underneath? I feel there is some good support under this market, but I also know that what with prices stuck in this range there isn’t much business getting done. Prices will always move to where the business will get done.

Will disappointed stale longs, especially those who may have exited positions choose to chase the market on strength? If so, then I might think there’s less of a chance of seeing a push to 6000.

I’m very much interested in hearing opinions about the expectations about yields from these new seed strains. They are dealing with more stress this year than they have previously, so I welcome any comments, especially from growers. Please, if anyone has some comments please pass them along.

I wonder how confident industry professionals really are about their positions. I can’t help but feel there is a great deal of uncertainty about the quality and quantity of the crop.

The Dec/March spread traded between 340 and 325. Volume was lighter than we have been seeing, with roughly 700 spreads changing hands. The Oct/Dec spread traded 195 and 200. I’d look for these spreads to widen further as penalties may apply to certificated stock and funds roll.

Moving Averages

December (5508)

March (5843)

Options Month

Implied Volatility

9 Day

55.19

58.40

October

23.00%

18 Day

55.80

58.82

November

23.50%

40 Day

54.71

57.65

December

25.25%

100/200 Day

55.83

58.36

March

24.75%

57.09

n/a

Futures

Calls

Puts

May

24.00%

7,000

2,000

1,100

July

23.00%

I’d enjoy knowing what issues you might like to see addressed in this letter, so please provide me with your comments and suggestions.

Jurgens Bauer