Cotton market receives support from stock market

13 Mar '09

4 min read

So where do we go from here? Over the last few days we have heard many analysts claim that the bottom is in for the stock market. We disagree and believe that we are simply witnessing a short-covering rally in a secular bear market. These rallies can be swift and may carry the market up 15 - 20 percent in no time. However, the current economic problems are far from over and are actually getting worse, and we believe that it will only be a matter of time until this rebound runs its course and the market heads back down to re-test its lows.

The cotton market has been benefiting from the rally in outside markets and may get another two or three cents out of it, but we don't see a sustained move higher just yet. There is simply too much foreign cotton still looking for a home and this will keep the AWP in check. For the coming week the AWP will be set at 31.85 cents, which puts the range for May futures at around 41 to 44 cents.

Even though there are some positive developments (US export sales, retail sales) that will keep the market well supported at 40 cents, the slow volume we have seen this week suggests that the market lacks the necessary momentum and conviction to surge higher at the moment. Our best guess is therefore for a sideways market between 40-46 cents in the near term.

Plexus Cotton Limited

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