Cotton challenged the highs from yesterday overnight as grains also were stronger prior to the opening. The stock market struggled after posting early gains and the dollar continued to lag as cotton found good fund buying to push cotton prices to a 7-day high.
There was also a bullish rumor out of China overnight that the Xinjiang area may have been negatively affected by cool wet weather during harvest. We did close above the 9-day moving average on above average volume with 20,000 futures and 15,000 options.
The export sales report from last week should be very light due to the Chinese holiday. Bottom line however, is the cotton market is paying very little attention to fundamentals and more so following grains and new crop acreage.
West Texas harvest conditions are going smoothly and we are expecting a good harvest as well as rumors that Pakistan is using much more of the genetically modified seed varieties that will help improve yield. Overall, the northern Hemisphere crop is looking very positive, but we still need several weeks to know for sure.
Technically, the market broke the 9-day moving average and does look like it wants to test the upside again tomorrow. RSI is back above 50% and open interest is still over 230k with rising cert stocks and a lack of demand. Grains were up again today but demand is quiet with the new crop closing in quickly.
Unless the market can break through 65.00, which would represent the top of the current downside trend channel, we will probably be making another test of the 50% retracement level in the near future. This level is almost the same as the 50 day moving average and if this is broken we should see more sell stops and spec liquidation.
marketing@alchempro.com
