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Cotton still trading in narrow range
01
Aug '08
Cotton continues to test the highs but failing to break through good scale up selling resistance near 75 cents.

We are still trading cotton in a very narrow uneventful range which continues to indicate we are eventually going to have trouble sustaining these levels. Fundamentals are still very bearish as demand has gotten very quiet with NY at theses prices. Volume was weak again today with only 7,000 futures and 10,000 options as the market continues to find very little commitment to break out of the current narrow trading range.

We are seeing good support in oil below 122 dls/bl and in the short term the CRB index does look oversold and due for a bounce. However, based on the lack of spec participation in cotton and without any bullish technical or fundamental information, looks like more sideways consolidation could take place.

Export sales were better than average, but we are one week away from the end of the 07/08 season and if we get another 250k in shipments next week, we will only get to 13.6 for exports which is 300k less than the USDA estimate and will have to be added on to 08/09 ending stocks.

NYF cotton prices are finding good downside support with the uncertainty of the Northern Hemisphere crop remaining and good hand to mouth buying on dips. However, we still have 113 days of time and descent volatility left in the Z'08 contract which does not expire until November 21st.

MACD has crossed and RSI is closing in on the neutral 50%. We are now at the top of the current trading range, and the range bound consolidation is still likely to last into the near future. At these levels, new sales are very difficult to make as mills wait for better prices to cover forward deliveries. Expect to see further testing of the highs continue but eventually come back down.

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