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Cotton futures demand weak & expected to fall further
22
Aug '08
Strong day in commodities across the board as oil lead the way up over 6 dollars at one point and closing close to 122.00 USD. This lead to a 1% retracement in the USD and a neutral to lower stock market. Commodities had been looking oversold and were due for a bounce. We should see some follow through tomorrow, but see upside scale up selling coming from the trade.

Volume was slightly above average at 14,000 futures and options, but the open interest remains on the low side. Export sales were not very impressive at 189k new sales and 270k shipments, but we did have another 20k in decerts. The overall demand feels weak and if this rally holds, demand will fall much lower.

Cotton will be influenced by outside markets, but cotton made a fresh 12 month low on Tuesday and we broke out of the intraday trading range set Monday, but there should be good scale up selling in Z'08 above 70 cents.

Technicals are turning friendly with the MACD starting to cross higher in cotton is already there and making a nice turn higher.

Considering the low open interest in cotton and the lack of demand, cotton feels like we may continue in a sideways trading range up to heavy resistance at 72.00. This will depend on how much the rebound in outside markets can follow through, but the short term upside looks limited.

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