The bearish reaction to the monthly USDA report was not initially obvious in the market reaction but became more obvious on Monday. Cotton had no fundamental defense to support values when the US dollar had it's biggest rally in a year that lead to a sharp sell off in most all commodities. With cotton, Monday's break violated an uptrend line which generated a clear technical sell signal.
Bottom line, cotton started the week in trouble and just never got out regardless of outside markets as many formerly bullish speculators either dumped positions outright or rolled their positions forward. By the end of the week, the differences between spot Dec and March widened by 75 points while spot Dec and Red Dec 08 widened by 219 points.
For the week, Dec 07 cotton lost 374 points, March cotton 299 points and Dec 08 only 162 points.
In other markets, while corn and wheat was mostly lower, soybeans posted solid gains of 21-23 cents higher to the highest level in nine years. In fact, January beans look poised to test its 1988 high of $10.88. Of course, soy meal and oil are also at multi-year highs with charts that look like rocket ships. It is tough to imagine Dec 08 cotton having much downside with that kind of action in the soy pit.
It was an extremely wild swinging week for the CRB spanning 3,700 points. The index ended the week about 500 points lower with precious metals taking it on the chin. Gold lost $47 and silver fell$1.03 per ounce. However, gold rallied almost $200 since mid August so the correction was not unexpected.
marketing@alchempro.com
