Futures were slightly higher in electronic trading as the market was able to break the 58 c/lb level. However, the high came early and the market continued to fall lower throughout the session to close near the lows. Volume continues to be very slow this week preceding the long Labor Day holiday as many of the brokers have taken vacations.
Futures were only estimated to be 10,000 contracts along with 8,000 options. Some of the locals were looking for buy stops early and got caught long as bearish options started to enter the ring.
Tomorrow's export sales report will be released at 8:30 EDT as many are expecting another big report to equal the 400k sales from the last two weeks. Shipments may continue to tail off slightly as we are expecting a number near 300k compared to 325k last week.
Some widely scattered showers are starting to benefit the Mississippi Delta regions. Local cotton prices in India and China remain weak as most mills are willing to wait for the new crop stocks to arrive. The stock market and grains were up strong today which may lead to another test of the highs tomorrow as long as we get a good new sales number.
Technically, we are starting to cross back above the 9-day moving average. After breaking out of the flag pattern on Monday, the market is struggling to find upside momentum above 58 c/lb. The gap down last Thursday has made the upside resistance at 59.50 hold, and the next level of significant support would be the bottom of the downside trend channel at 55.00 based Z'07.
The stock market and grains bounced back today so we will have to see if the sales report tomorrow can push us higher as RSI is now in the mid 30's.
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