Futures were trading lower electronically and with a weak overnight grain market cotton looked like it wanted to go lower. However, at the beginning of open outcry, the market rallied and found some buy stops above Friday's contract high at 68.70, but was unable to break through the selling pressure from the trade.
The market did sell off after that almost 140 pts lower from the highs, but found good support under 67.50 or the previous contract high. Volume was down today with only 17,000 in futures and only 16,000 combined options.
We are expecting a higher spec hedge report tomorrow to add to the 30% long position from last week, but it does seem like the market is feeling more upside selling pressure coming from new crop. On top of that, the grains today had their worst day of the year.
Soybeans locked down the limit at 50 cents lower and corn down the limit as well at 20 cents. Wheat also had a bad day and the CRB was down almost 500 on a very tough day for commodities. Cotton held up very well considering, but if this trend continues, we may get the much needed correction we have been expecting.
Technically, the market still looks strong even after today's pull back. We are going to find support on pull backs like we have been seeing over the last 8 weeks.
With soybeans and corn down the limit, we may see some follow through weakness from cotton as we attempt to break today's low of 67.41, 67.00 and eventually the 9-day moving average at 66.54.
RSI is still right at 80 and very much in pull back territory. Upside targets will continue to be in place above today's new contract high in Z'08 at 68.80 and 69.00.
marketing@alchempro.com
