Certificated cotton stocks seem to be stabilizing at 477K
08 Sep '07
2 min read
Electronic trading opened higher but ran out of steam and the market sold off and made new weekly lows at 59.80 before bouncing back above 60 cents and settling @ 60.21. The volume was light and the range narrow as there was also some bearish options which added to the weakness.
The stock market also fell almost 2% on negative job growth for the first time in 4 years. The grains however we able to ignore that weakness as wheat made back its losses from yesterday, but did stall out at what is now a double top on the chart. Soybeans and corn also closed higher as cotton moved slightly lower on 12,000 futures and 8,000 options.
Export sales were also disappointing with 280k that was 38% less than last week's season high, but shipments were about the same with 334k. Rumors of bigger crops in China and India along with new crop harvesting starting to pick up have mills less nervous to wait for lower prices before buying.
Next week may make some of the larger crop rumors a reality on Wednesday's USDA's S&D report with estimates of .5 mb's more in India and possibly another 1 mb's in China. Certificated cotton stocks seem to be stabilizing at 477K with another decert today of 12,000 bales.
Technically, RSI is at 50% and the specs seem to be running out of patience with the upside that has failed three times in attempts to break through 61.85 set last Friday. This has actually built a triple top on the chart below the 50 day moving average.
Obviously new crop grains remain strong, but the economy and stock market are signalling a possible recession which will make it very hard for cotton to rally. After a week of light volume following the strong rally from last Friday, the market looks vulnerable to restest the lows next week.
We don't expect a straight retracement as there are still several weeks remaining for the Northern Hem crop which will be very critical, but we may be returning to a sell rally mentality.
marketing@alchempro.com
