Cotton traded lower today on light volume as the market is looking for some more information to build a case for where the market should go in the short term. Fundamentally, business has picked up but mills are not chasing the price. After the initial business began last week, and the market did not run away, mills are now backing away which could be bearish short term.
Technically, there is no real level of support on the N'08 chart until we test the 66.13 low. Also, outside grain markets are not supporting cotton as they also were down today and have been slipping lately. Volume was very light today with only 8,000 futures and 10,000 options.
Cert stocks continue to rise rapidly with now over 1.23 million bales with 150k awaiting review. Spreads are still very wide on the board going forward which is confirming a lack of demand for the front month and the open interest in cotton has been under pressure ever since it peaked during the volatile run at the end of February.
Energy and metal prices were firm as oil set a new record today breaking 120 usd/bl while the dollar fell under pressure and the stock market gave back gains from last week. In the short term, we will have to keep an eye on the outside markets in grains and any changes in open interest as cotton tries to find a bottom.
We are in a negative seasonal pattern as we approach the large Northern Hemisphere planting period. Technically, we broke the strong support line at 70 cents in N’08 last week. The next strong line of support can be found at 66.13 but it may avoid testing until closer to FND in June.
The cotton market feels like we are trying to put in a short term low near 69 cents as we have had two inside trading days in a row as we are starting to create a flag pattern which could break later this week. RSI is staring to show an oversold level in the low 30’s, but we are still very influenced by the grain markets and they are currently going lower.
Technically, there is no real level of support on the N'08 chart until we test the 66.13 low. Also, outside grain markets are not supporting cotton as they also were down today and have been slipping lately. Volume was very light today with only 8,000 futures and 10,000 options.
Cert stocks continue to rise rapidly with now over 1.23 million bales with 150k awaiting review. Spreads are still very wide on the board going forward which is confirming a lack of demand for the front month and the open interest in cotton has been under pressure ever since it peaked during the volatile run at the end of February.
Energy and metal prices were firm as oil set a new record today breaking 120 usd/bl while the dollar fell under pressure and the stock market gave back gains from last week. In the short term, we will have to keep an eye on the outside markets in grains and any changes in open interest as cotton tries to find a bottom.
We are in a negative seasonal pattern as we approach the large Northern Hemisphere planting period. Technically, we broke the strong support line at 70 cents in N’08 last week. The next strong line of support can be found at 66.13 but it may avoid testing until closer to FND in June.
The cotton market feels like we are trying to put in a short term low near 69 cents as we have had two inside trading days in a row as we are starting to create a flag pattern which could break later this week. RSI is staring to show an oversold level in the low 30’s, but we are still very influenced by the grain markets and they are currently going lower.
