Cotton made another attempt to move higher and failed on the close to settle back near unchanged. Short covering overnight which started the rally was joined by friendly option activity and encouraged the locals to push the market near 64.50.
However, there was no follow through buying and the market again returned to the recent lows. The volume was average again today with only 17,000 futures and 18,000 options which kept the market in another narrow trading range.
The consensus seems to be that the market is looking for a low and may possibly try to find one before next weeks Federal Reserve announcement and the USDA crop report on Tuesday, December 11th. Grains and metals were stronger today as energy and the dollar came off slightly.
We are still holding the low from Friday at 62.80, but there is a gap below 62.50 that might be targeted this week. Sales should be in line with previous weeks on Thursday as the specs are looking for some positive news to justify the market to put in a bottom at this level.
Specs are now under 20% and have room to buy if they get a friendly signal from the market. Technically, we broke the H'08 6-month uptrend line, and demand still appears slow. The stock market is stable with more confidence in the financial markets and a good indication from the Fed that we will get a rate cut up to 50 pts next week.
RSI is 30 and we may see a further test of the downside this week as we prepare for some positive market news next week.
marketing@alchempro.com
