Finally, after four dull and boring trading days this week, we finally broke out of the narrow trading range and almost went limit down at one point.
The market was unable to break the heavy resistance at 75 cents and eventually found good sell orders under 74 as we fell hard and fast with very little support until we hit limit down and uncovered some demand and on call sales fixations. Volume was much better today with 9,000 futures and 10,000 options as weak grain prices helped push cotton down.
Next week will start us off on the final stretch for the Northern Hemisphere crop and begin the long hot August month which could make or break the U.S. crop. We are still getting good scale down support in NY on the lows so at least in the short term we expect the futures prices to have limited down side.
We will get another USDA report on the 12th, but overall the market seems to be following outside markets more than having committed traders taking the lead in cotton outright. Business continues hand to mouth as we get closer to 4th quarter deliveries.
NYF cotton prices are finding good downside support with the uncertainty of the Northern Hemisphere crop remaining and good hand to mouth buying on dips. We still have 100 days of time and descent volatility left in the Z'08 contract which does not expire until November 21st.
MACD has crossed and RSI is closing in on the neutral 50%. We are now in the middle of the current trading range, and the consolidation is still likely to last into the near future.
On the break in NY today, we put some business together but it is limited and we need to see further breaks to do any volume. In the short term, the 70-75 cent range looks like it will have good support.
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