USA : Market continues to move sideways

USA : Market continues to move sideways February 16, 2008

Grains and cotton were up overnight on follow through buying after yesterdays limit up performance in the H'08 contract. However, the rally ran into heavy scale up trade selling near the highs between 72 K’08 and 78 cents based Z'08. This lead to some profit taking and possibly some squaring up of positions heading into the long weekend. Buying dried up soon after the opening as grains lead the way lower and the spreads started to widen back out. There was a significant decert of 60,000 bales overnight which would indicate that some new sales had been made recently. Volume was strong again today with 86,000 futures and 20,000 options as we continue to roll out of the H'08 with only 4 trading days left after our President day holiday on Monday. Open interest overall rose almost 6,000 contracts yesterday back over 275k total contracts, but H'08 fell almost 10,000 contracts to leave just over 50,000 contracts open as of this morning. After seeing the spreads widen back out, we expect we should be close to 40,000 contracts left to liquidate when we reopen on Tuesday. New sales are very quiet with the market at these levels as we will start to focus on K'08 for future business starting next week. However, with the K'08 currently above 70 cents, this will make new sales less likely until we see a pull back. Technically, we filled the gap today above 70 cents, but continue to have trouble closing above this level of resistance. Grains were mixed to loweras well as most of the commodities while the equity markets continue to slide lower as investors are seeking for further rate cuts to stimulate the economy.