NYK Futures – Ahead of Christmas and New Year_ little to no .pdf by liningnvp


									                                                                                                                    October 19, 2012


                                                                                      ICE Cotton Futures Dec12, Daily

NYK Futures – Prices propelled higher this week. Whatever the trigger was for the initial strength (…the market was void of any
fresh fundamental news…), it sparked frantic activity and large volume trading from most sectors. It appears likely that managed
money funds, which in recent weeks were actively shorting the market, were disappointed to see no follow –through below the
early October lows and started covering positions. Especially once the market broke above 72.50-73.00 (Dec12), large amount of
stops were triggered and then again above 75.00.
It is quite possible that the big open interest of the Dec 75 call-Dec 80 call strike range (23’000 lots), forced short holders of
those calls to either protect positions by buying futures or liquidate option positions which all helped to enhance the force of the
underlying future’s move. The implied volatility of the Dec12 options jumped from 24-25% to 31% whereas the forward months
saw a much milder increase.
The higher market attracted intense fixation selling and very keen interest from many origins to sell cotton. On the other hand, it
forced mills to sidelines.
The Dec12-Mar13 spread was subject to a massive volatility increase as well. For the past three months it was trading within
(roughly) 50 and 100 points discount (Dec12 to Mar13). Once this range got broken earlier in the week, the spreading activity
immediately picked-up in an almost panicky fashion and made Dec12 surge to 300 points premium over Mar13 at one point.
Technical picture: The mid-term wave count remains negative with critical resistance area between 82.50 and 85.00. Other trend
indicators have turned positive from neutral. Key support is at 75.00, then 72.50 (basis Dec12).

     ZCE (China) Cotton Futures Jan13 – ICE Dec12 Spread, Daily                   ICE Cotton Dec12-Mar13 Spread, Daily

                                                                  1                                                 www.reinhart.com
                                                                                                                                                                          October 19, 2012


U.S.A. -In the span of less than one week the lead futures month made a considerable gain from its most recent lows.
This latest rally was gift to many growers who had presold their 2012 production, but had yet to fix the price. With
about one month to 1st notice day for the Dec12 contract, the clock was ticking and before this week it was looking
rather gloomy for those producers in this category. Spot market activity is still lagging as the harvest is not yet
enough advanced for producers to be able to market what they will produce. As to be expected under these
circumstances with limited offers from sellers and a near term shortage of the best qualities, the country basis
remains strong.

India – The textile ministry of India reported cotton consumption by non-SSI mill at 1.93 million bales during August,
2012 up 15.29% from the same period last year and almost 3% lower than the previous month. April-August
consumption stood at 9.58 million bales up 12.67% from same period last year.

Cotton yarn export registration stood at 64.3 million kg in September, down 16.7% from the same period last year
and 22.61% lower than the previous month. Local traders said that export registrations might improve during October
on firm overseas demand.

China – After a narrow ranged sideways consolidation around 19’500 (basis Jan13 contract) last week, the ZCE market
rallied a few hundred points to close just above the former 19’660 key resistance level. However, open interest
declined by 40’000 contracts this week, suggesting that the recent rally was mainly due to short covering. On the
other hand, if prices succeed to build value above 19’700, another leg to the upside to the 20’000-20’150 area is

Physical business for mainly nearby coverage ground to a halt towards the end of this week in the face of significantly
higher imported cotton offers. Offers of customs cleared imported cotton becomes scarcer and bonded warehouse
stocks are also reported to be decreasing. Polyester filament prices moved about 1% lower (losing all of last week’s
gains) and yarn prices are unchanged for the week. China Customs reported that the export value of textile products
for Sep was up 9.33% compared to the previous year.

                                             Chinese Reserve Buying 2012/2013

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customers should not invest in these products unless they are satisfied that the products are suitable for them and have sought professional advice. All information in this report is obtained from
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procured for the exclusive benefit of customers.

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