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Cotton market to have trouble keeping up
Jan '09
Unemployment rose to 7.2% and the stock market fell further. Cotton and grains still rallied early but cotton eventually fell. The dollar rose late in the day and cotton took profits as we wait for the USDA report on Monday. Grains are rallying due to very dry conditions affecting the harvest in South America, but cotton will have trouble keeping up. Oil and metals are also struggling as the equity markets fall on more bad economic news.

The cotton market does feel overdone but the COT report which is on page 2 shows that non commercials are slowly coming back into the market but open interest is only up slightly. Have to see what the USDA says on Monday, but expect that cotton will continue to struggle at the highs as we now have a spread between NY and the AWP that can redeem cotton at replacement levels.

The basis in the country is weak and demand is hand to mouth so after a few more weeks of sideways testing of the upside we may get a big correction before FND in the H'09.

Technically, cotton is starting to slow down, but the moving averages have crossed and the MACD has not crossed lower. Open interest has started to rise and the specs are turning long so the momentum is there for more upside.

Cotton keeps setting new highs as we set a new 9-week high today. RSI is at 59 and the momentum is certainly looking more positive as we start to enter the more friendly seasonal demand period but the equity markets are struggling and that may spill over into weaker commodities.

Ecom USA

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