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Cotton market moves higher

03
May '08
Cotton moved higher fueled by higher other commodities prices. The general pull back in commodities this week came to an end today after slightly higher prices overnight. We did see an attempt at the lows set on Thursday, but most every commodity closed in green today as the CRB worked back above 400.

We are seeing good scale down demand under 70 cents in N'08 as well as large volumes of on-call sales left to hedge keeping N'08 well supported. Open interest rose slightly to 250K overnight but volume was light with only 13,000 futures and 13,000 options.

We should have a good sales report next week and we will also have the USDA S&D report next Friday to digest as well. The market in general is feeling like a short term bottom is in place. Cert stocks continue to rise but good business is being done and the spreads are starting to narrow which is showing a firm spot month.

The stock market and dollar enjoyed a nice week, but the trend from the weak economy does not feel like it is over yet. We may still have some volatility going forward which should allow commodities to rally and the dollar to find resistance. The short term for cotton feels friendly and we will have to see if the technicals can start to turn positive next week.

We are in a negative seasonal pattern as we approach the large Northern Hemisphere planting period. Technically, we broke the strong support line at 70 cents in N'08 this week.

The next strong line of support can be found at 66.13 but it may avoid testing until closer to FND in June. The cotton market feels like we are putting in a short term bottom, but the Commitment of traders report showed the non-commercials continue to reduce their longs.

Oil prices rebounded today all the way to 115.00 even though the dollar closed higher. Short term feels friendly as we may try and test the 72.50 level and the 9-day moving average next week if grains stay firm.

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