Cotton market falls slightly

14 Feb '08

2 min read

Cotton fell slightly today on mixed results in commodities and the equity markets. There was a positive report for retail sales this morning showing strength in automobiles and energies which gave confidence that a recession may be avoided.

Along with the President signing a 150 billion dollar consumer stimulus package today, the equity markets rallied strong and even closed above the recent downside trend line. Volume is falling with only 36,000 futures and 7,000 options as we completed the last day of the large Goldman Sachs roll.

The open interest in H'08 has been coming down at a steady pace and we should make a smooth transition to K'08. Cert stocks have been growing as there does not seem to be a great deal of nearby demand to justify taking the cert stock.

We still have 6 trading days before FND and we are getting some nearby interest from those mills who want to take advantage of the cheaper prices in NY for March shipment. China comes back form holiday tomorrow, but we are expecting a below average export sales report tomorrow as we continue to digest the bearish fundamental picture in cotton.

Technically the moving averages continue to get closer to crossing which may give the technical signals for more sell stops. We did close below the 50 day moving average and may uncover some more sellers if demand does not surface with China still in holiday mode. We continue to see good scale down trade buying under 66.50 and bounced back close to 67.50 before closing weaker.

Fund rolling will continue with only 6 trading days before FND, and unless there is a stopper, we may continue to test the downside.

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