Cotton found a bounce on light volume after testing the lows yesterday. Electronically, grains traded higher overnight and this lead to a push for the highs in cotton. However, most of the day was spent near where we settled just below 63.00. There is good technical support at 62.15 which is also the 50 day moving average and 50% retracement level.
We are getting good resistance at 64.00 which represents the top of the current range we have been locked in over a week now. Volume was below average again at only 13,000 futures and 6,000 options.
It looks like cotton is waiting for the USDA report on Friday, but we are not expecting much guidance from this report with the U.S. crop at 17.81 already in the middle of the range of expectations. We may possibly get a cut in U.S. exports, but in either case, world ending stocks should be close to unchanged.
We need to get some more quality feedback on new crop and that will be coming out over the next several weeks. For the moment cotton seems to have good support under the market based on the correction in soybeans, a very strong stock market and a weaker dollar.
Technically, the market is in a downside trend channel, but we are moving sideways at the moment and consolidating for bigger moves down the road. RSI is below 50% and open interest is still over 230k with rising cert stocks and a lack of demand. Grains are off the highs and demand is quiet with the new crop closing in quickly.
Unless the market can break through 64.00, which would represent the top of the current sideways 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.
We are getting good resistance at 64.00 which represents the top of the current range we have been locked in over a week now. Volume was below average again at only 13,000 futures and 6,000 options.
It looks like cotton is waiting for the USDA report on Friday, but we are not expecting much guidance from this report with the U.S. crop at 17.81 already in the middle of the range of expectations. We may possibly get a cut in U.S. exports, but in either case, world ending stocks should be close to unchanged.
We need to get some more quality feedback on new crop and that will be coming out over the next several weeks. For the moment cotton seems to have good support under the market based on the correction in soybeans, a very strong stock market and a weaker dollar.
Technically, the market is in a downside trend channel, but we are moving sideways at the moment and consolidating for bigger moves down the road. RSI is below 50% and open interest is still over 230k with rising cert stocks and a lack of demand. Grains are off the highs and demand is quiet with the new crop closing in quickly.
Unless the market can break through 64.00, which would represent the top of the current sideways 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.
