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Cotton market has trouble breaking 70 cents
30
Jan '08
Cotton continues to follow the grain markets as a limit move in wheat yesterday took us higher and a pull back today drug us lower. Cotton just has no direction at the moment, but with the amount of spec participation, we tend to follow strength from other commodities.

The stock market also squeaked out a bit of a gain going into tomorrows Fed announcement on further interest rate cuts estimated between 25 and 50 basis points. Foreign markets were higher overnight and there does seem to be some consolidation at the 12,000 level in the Dow with some strong resistance above 12,500. Volume was average with 21,000 futures and 8,000 options as open interest rose over 3,000 contracts in yesterday's up move.

The spec long position came down to 25.3% after the recession meltdown correction in cotton as well as grains. We are still off the highs and looking for a retest that may not happen since the stock market will struggle to rally with all the housing uncertainty and recession fears.

This will be a challenge nearby with Chinese New Year and prices reaching unattractive levels to generate good demand. Cotton nearby needs to hold the 67.00 level but will have trouble breaking 70 cents.

The grains will dictate the short term price range and that will have a lot to do with the stock market and how much of a rally it can make after falling over 15% since the beginning of the year.

RSI is at 49 and prices are holding the low at the 50-day moving average near 67.00 as this trade channel should hold up short term. The grains and other commodities are finding some strength along with a weaker dollar. U.S. stocks were up today looking for further rate cuts at the Fed meeting on Wednesday, but we are still in a bear market as Asia and Europe have been flat nearby.

Demand remains slow, but this week should be a more friendly export report and the specs did lower their spec long position as well.

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