After a volatile week which ended on fresh lows, we started this week off on light volume in a narrow trading range. After potential threats from Tropical storm Fay faded and West Texas received very beneficial rains over the weekend, the market was quiet as demand remains hand to mouth.
We are in a quiet part of the season as we wait for follow through support to come from outside markets. However, looking at the light volume with futures and options under 10,000, we continue to trade sideways to lower.
The spec hedge shows the position remains flat as we moved to .9% long from 1.6% short last week and open interest remains under 220k. The USD will be the most significant factor over the short term as we wait to see if this commodity correction can hold.
See a recent chart on page 3 in attached PDF where we analyze the break in the long term downside trend channel. Cotton remains stuck in the intraday trading range from Friday (67.01-69.41) and we could be setting up for another sideways trend channel.
Technicals continue to look negative as specs seem to have a lack of interest in cotton. We could get a few more bounces on the over sold technicals down the road, but based on the performance of the dollar recently, this correction in commodities feels like it may have started a long term move downward.
Considering the index funds started reducing their positions and the noncommercials have been coming down steadily over the last several months, the trend remains bearish for now.
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.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "UBM China (Shanghai)")
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
