Export sales should be respectable tomorrow

20 Aug '08

2 min read

Another dull day as the cotton market is settling back into a trading range with good support at 67.00 cents. Volume remains low under 10,000 futures as the market found good resistance at 68.00 cents and looks like it may be setting up for some more sideways trading.

Open interest is at 6 month lows and the cotton market cannot get motivated to move up or down at the moment. Grains had a nice early morning bounce on what looked like follow through from the limit up move on Monday, but it quickly failed and closed lower on the day.

Export sales tomorrow should be respectable but under the 400k from last week. Shipments also remain on the low side just above 200k and this is not very bullish. Demand has slowed down at the moment and there is good news coming out about the crop.

The USD is starting to show some overbought signals as the CRB tries to make up some of the ground that was lost over the last 8 weeks. Energy, metals and grains are trying to put in a bottom at these levels, but cotton looks like it has divorced itself somewhat from the outside markets and should remain under pressure in the short term.

Technicals continue to look negative as specs seem to have a lack of interest in cotton. Grains were strong early today and metals and energy were positive as the commodity index tries to put in a bottom.

We could get a few more bounces on the over sold technicals down the road, but based on the performance of the dollar recently, this correction in commodities feels like it may have started a long term move downward.

Considering the index funds started reducing their positions and the noncommercials have been coming down steadily over the last several months, the trend remains bearish for now.

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