After a long Easter weekend, the market started off quietly higher overnight but built up into another limit move as we tested the highs set on Thursday's bounce off the limit down lows. We continue to see good volatility although volume is slowing down with only 26,000 futures and 21,000 options.
We bounced pretty well off some good long term support last week and may have established a short term low. We are approaching a big acreage estimate by the USDA next Monday and the market may want to wait for that number before we make any retest of the downside.
Business was evident over the weekend and the grains had a nice correction which helped feed the rally in cotton prices. The spec long position only came down slightly after a big sell off last week to reach 11.9% on falling open interest which you can see on page 2 in attached PDF.
We may be setting up for a 70/75 cent trading range on the front month as we continue to see growing cert stocks and a growing spread between K'08 and the back months. Technically, we have RSI near 40 and all other signals were showing an oversold market after almost a 10 cent pull back last week.
Technically, we are heading to the oversold area with RSI below 40%. We are back to where we were before the market ran up and created the island top. The futures might finally attempt to settle down to reconnect with cash market, and the fundamentals might eventually come back into play.
We're now at a level that some mills are willing to consider purchasing for their inventories. Despite the overall sell off in commodities, cotton market is holding fairly well. Also the acreage report is due in a week, which might give the market some support.
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