The cotton market along with other commodities were down slightly overnight as foreign markets continue to struggle under the concern of slower growth spilling over into other markets. Cotton broke the strong support line it has had near 63.00 c/lb. based Z'07, and made a new 9-month low when we reached 61.70 on the close.
The spread was still the main feature of activity with futures volume above average with 64,000 and 17,000 options. This break today sealed the fate of the moving averages crossing downward which may also have lead to some sell stops as trade scale down buying stopped the slide.
Export sales were delayed until Friday, but cotton has found a way to divorce itself from soybeans which continue to rally inspite of weaker wheat and corn prices. The trend certainly feels like specs are ready to take some outright profits against their long Dec position which remained near 50,000 contracts this morning.
Obviously, this was cut sharply today as we have four trading days left before FND. The stock market failed to find any follow through after Tuesday's strong rally and there is still speculation that the holiday season will be disappointing for consumer spending.
Technically, we got the break we needed today to point the technicals South and we may have further to go. The 9 day moving average crossed the 50-day to the downside for the first time since the market had a 12 cent retracement from the highs set in July'07.
Based on the large spec long position, growing cert stocks and lack of demand recently, as long as the dollar can stabilize and energy and metals continue to weaken, cotton is vulnerable to test the mid 60's based H'08 and sparking more technical sell signals. The stock market looks like it is stabilizing which should strengthen the dollar and weaken commodities.
marketing@alchempro.com
