Interviews
Technicians continue to be frustrated with cotton market inability
09 Apr '07
4 min read
So, very possibly as far as an official announcement concerning Chinese TRQ, we may be waiting for something that isn't coming. However, there is a school of thought that the Chinese just may not make an "official" announcement - that very possibly the import licenses are already being distributed quietly or "step by step" as referred to by the Chinese official - at least to some mills.
The export sales report this week was quite good as 394,000 bales were reported sold with 206,000 going to China. This is the second straight week with China taking 200,000 plus. Although 317,000 bales left US ports, a marketing year high, unfortunately this is still woefully short of what is needed to reach the USDA projection.
USDA issues their April updated supply/demand report Tuesday and there is no doubt in anyone's mind that another cut in exports is justified raising the carryout proportionately.
Two weeks ago, we commented on the very popular seasonal trade of long December cotton against short July cotton. Historically, July has shown a tendency to loose ground against the December contract (or Dec gain on July) between now and first notice day for the July contract 13 of the last 15 years according to Moore Research, the industry leader in historical trends. The two years that July gained dramatically on the December were 1995 and 1998.
An unprecedented string of 12 consecutive record setting sessions of open interest increases finally came to a halt Wednesday. One year ago, like today, the spot month was chopping between 5275 and 5445 but the open interest was almost 100,000 less than today.
Technicians continue to be frustrated with the cotton market inability or lack of interest in follow-through - either way. Cotton's trading range continues tight with commercially initiated support and resistance quite effective at both ends of the range. Most probably, rallies will continue to find trade selling on a scale up basis; picking up sharply near 5438, 1,100 over the AWP. Likewise, export demand will probably be evident on dips below 5300. Speculative sell stops will be found below 5270 with buy stops above 5350, 5380 and 5440-5445.
However, the monstrous size of the open interest would certainly portend that the trading range will expand and probably very soon. Momentum indicators would seem to favor the first attempt to break out will be to the downside but if significant commercial buying, fixations and export demand is still there, which I believe will be the case, then trailing buy stops will leave the upside vulnerable.
The export sales report this week was quite good as 394,000 bales were reported sold with 206,000 going to China. This is the second straight week with China taking 200,000 plus. Although 317,000 bales left US ports, a marketing year high, unfortunately this is still woefully short of what is needed to reach the USDA projection.
USDA issues their April updated supply/demand report Tuesday and there is no doubt in anyone's mind that another cut in exports is justified raising the carryout proportionately.
Two weeks ago, we commented on the very popular seasonal trade of long December cotton against short July cotton. Historically, July has shown a tendency to loose ground against the December contract (or Dec gain on July) between now and first notice day for the July contract 13 of the last 15 years according to Moore Research, the industry leader in historical trends. The two years that July gained dramatically on the December were 1995 and 1998.
An unprecedented string of 12 consecutive record setting sessions of open interest increases finally came to a halt Wednesday. One year ago, like today, the spot month was chopping between 5275 and 5445 but the open interest was almost 100,000 less than today.
Technicians continue to be frustrated with the cotton market inability or lack of interest in follow-through - either way. Cotton's trading range continues tight with commercially initiated support and resistance quite effective at both ends of the range. Most probably, rallies will continue to find trade selling on a scale up basis; picking up sharply near 5438, 1,100 over the AWP. Likewise, export demand will probably be evident on dips below 5300. Speculative sell stops will be found below 5270 with buy stops above 5350, 5380 and 5440-5445.
However, the monstrous size of the open interest would certainly portend that the trading range will expand and probably very soon. Momentum indicators would seem to favor the first attempt to break out will be to the downside but if significant commercial buying, fixations and export demand is still there, which I believe will be the case, then trailing buy stops will leave the upside vulnerable.
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