Cotton prices closed limit bid, +400 with Dec showing a settlement of 110.34, but in fact synthetically the market traded 112.25 on the option close, up almost another 200 points. Option settlements are based upon that synthetic value. Limits will be 600 points on Thursday. Look for 113.50 to provide initial resistance (it is already trading there at 10PM and again at 5AM). Above there, 115-117, and then 119 are other resistance levels. Support is viewed at 111, (+/-50 points) as well as 109.50, below that number and things could get ugly.... As for reasons behind the breakout move, it is simply that - a breakout move. Sure fundamentals may have played a role as fears of damage to the crop condition due to weather, with heavy rains on top of the already drought stricken situation, along with a recent improvement in exports. And China is apt to acquire already-planned purchases, but protection among users may help fuel an already speculative sensitive situation as Wednesday's breakout on the upside will attest, and we've seen what can happen when that fever takes hold. Long call spreaders and those long the Z/H spread should be in position to benefit from a further up move, but don't feel the market will turn ballistic in advance of the USDA crop report coming early Monday morning, or will it? Supply concerns are growing, but demand is another key. Perhaps I should say, "What demand?" as there hasn't really been any, perhaps we will learn more with the release of export numbers. Of interest is the lack of reaction to Informa's report issued yesterday that suggested a bearish USDA number coming, as they increased planted acreage. That may caution some in the cotton industry more than it will specs. It could also delay fresh longs from getting into positions, but I will be glad to explore things for anyone interested. This market may leap.
Cocoa prices seem prepared for a further decline, yet I cannot fell comfortable about selling it here.
Coffee prices rebounded from yesterday's price drop and look as if wanting to try for further upside. Expect a struggle making a new high until momentum is rebuilt. For now, am flat and waiting to get through Friday's option expiration. Market prices could go either way here, though am inclined to think they will follow what happens in outside markets. Then again with option expiry anything is possible, though October isn't a principle month, so open interest isn't as large as traders see in July or Dec, so impact from options should be toned down.
Sugar sources continue to point towards available supply to keep pressure on the market, even though values improved during Wednesday's session. The positive feel occurring in other markets may drag sugar (a spec favorite) along, so not holding nor suggesting anything here. The trend is negative, and selling into strength seems a better play, but with the strength among outside markets I beg off here.
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Best trade!
Softs Market Review for September 8th 
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