– Cotton once again had an eventful New Year’s holiday shortened week, trading in a 573 point range between 80.37 and 86.10 basis H23 on average futures volume of 31,082 contracts.
– Option volatility has stayed high in the high 30’s and whilst confined to a relatively tight range, the intraday range of the week that has averaged 352 points, probably justifies why volatility remains high!
– The USDA export sales report for the week ending 29th December, showed another week of low sales (though allowance must be made for the holiday period) with total net sales of only 39,600 bales reported for current crop and no sales at all made for new crop! The reported largest number was to Vietnam with 15,500 bales, though that included 13,400 bales switched from China, i.e. existing sales. The largest outright sales were 13,700 bales to Turkey (plus 2,800 bales of cancellations). This market aside, nowhere else made it in to 5 digit sales.
– The weekly CFTC COT report as of last Tuesday 3rd January saw Managed Money (MM) return as net sellers. MM sold a net 4,576 futures to take their net long to just 11,405 contracts. Between MM, OR and NR their overall net long lies at 15,233 contracts. The strength seen at the tail end of the week will almost certainly show up as buying by MM in next week’s report but in truth all we have done is close in the top half of the 77.50 to 89.92 range we have been in since early November!
– Reasoning for the rise so far as we can determine seems to have arisen from the much talked about “Fund rebalancing” which some suggest may mean as much as 15k futures being bought although we are highly sceptical it will be that much. Some front running of this suggested purchase may have already taken place and potentially be largely priced in, noting Cotton is up over 500 points in just the last 2 trading days!