Cotton has traded in almost a mirror image 3 days in a row if you notice the candlestick formations. We continue to stay in a trading range as we are starting to form a flag pattern which could be heading for a break out soon.
It is hard to say which way it will go since the specs and funds are now approaching a 30% long position and the trade have much more ammunition to sell at these levels with new crop fixed price purchases being made. Volume was below the weekly average at 16,000 futures and 14,000 options as the market continues to move sideways.
Export sales report tomorrow could be in the sub-200k range for sales and under 250k for shipments as new U.S. sales continue to struggle. Outside markets were friendly today as the stock market was fueled higher off agreements made in the auto industry as well as strength from the banking sector.
Grains were also benefiting from this news as soybeans were up 20 cents and wheat was up the limit in the Z'07 contract. Economically, we are trading 150 pts from all time Dow Jones highs of 14,000 and grains are trading at record high levels as well. All of these factors will continue to keep solid support in the cotton market.
Technically, the pattern we have been repeating this week is a hanging man symbol which is bearish. We are seeing the highs come in lower as the lows are just above the bottom side of the upward trend channel and the 9-day moving average. It has looked like funds and locals are finding significant trade scale up selling above 66.50 which is the 10-week high.
Trying to break the upside resistance at 66.50 will be very important this week in order to keep this rally from technically turning negative. RSI and the lack of demand are showing an overbought market.
marketing@alchempro.com
