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Cotton markets witness roller coaster rides in this week
04
Oct '08
We had a wild ride in the market this week as trading across the broad has been volatile. Another bank news came out Thursday night when Wachovia Bank's board approved Wells Fargo's acquisition proposal.

Despite the talk with Citigroup on a deal backed by FDIC, Wachovia agreed to be acquired by Wells Fargo's $15.1 billion all stock deal, which is not involving any help from the government.

Wachovia is now in the center of news as Citigroup stands by its previous proposal. The stock market rose by triple digits during the first half hour of trading, and it looked like the market had factored in the possible pass of the House on the financial bailout plan.

The vote came in the early afternoon and it was a go. Feelings towards pass of the plan are still mixed as to whether or not it's going to work out as it's supposed to, but what happens next is to work out the details.

ICE cotton Friday session was flat and light in the early morning trading. It held slight gain for the majority of the session before following the stock market and sliding lower post House vote. Dow was trading at 220 higher pre-vote but completely reversed its course to close with a hefty 157 loss.

All months cotton settled sharply lower as well. The commitment report shows no major changes from last week. The holdings by all groups are slightly reduced as the open interest came down. Index funds reduced their net position further by nearly 2,000 contracts.

The U.S. economic picture is looking bearish and uncertain even with the bailout plan in effect. The weak economic conditions are hitting Asia as well as Europe and there does not appear to be an end nearby.

The fear of economic slowdown is worldwide and the commodity prices are affected accordingly. We're trading in the 50's range and demand should come in at this level. However, the decreasing world demand proved to the opposite.

It looks very bearish both fundamentally and technically and the MACD crossed downwards not long ago. Though it's not possible to pick a bottom yet, the deep the drop, the sharper the bounce will be.

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