Market was higher overnight as cotton continues to benefit from the strength in the grain markets. The stock market traded lower to unchanged most of the day as many investors are waiting to hear the news from the Federal Reserve tomorrow. We are feeling a tendency to test the highs as the market cautiously moves higher.
Volume was strong today as well trading 21,000 in futures and 12,000 options as the market continues to find technical strength. We get the spec hedge report tomorrow and should see a small increase in the specs long position from 21.9% to closer to 25%.
There is certainly a move from the funds to find buy stops as we set a new 6-week high today and have now bounced over 7 cents from the lows set on August 24th. With the RSI reaching close to overbought levels and the market moving up so quickly, we are due for a correction, but will have to wait and see how the stock market reacts tomorrow to the Fed decision. That along with movement in the grain markets will determine if we can take out the 6500 level for Z'07 and move higher.
Technically, RSI is closing in on 70% which would signal an overbought market, but we closed above the 50 day moving average so technically we are still in an uptrend. The cotton market has had several up days in a row as we continue to improve the technical buy picture.
Obviously new crop grains will be critical to the further upside in this move as the funds continue to buy into scale up trade selling. There are still several weeks remaining for the Northern Hem crop which will be very critical, but the short term trend remains friendly.
marketing@alchempro.com
