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Cotton market keeps sliding lower

11
Sep '08
Cotton keeps sliding lower with very little upside support, but we are reaching oversold levels with RSI at 30%. Export sales should be good tomorrow and we may get some bullish support from the crop reports on Friday. The strong dollar broke through 80 and has made a very strong correction since the end of June.

Oil also broke some downside support at 102.00 and looks like it may make a test under 100 USD. Volume remains above average with 16,000 contracts and 18,000 options, but open interest stays unchanged.

The weak economic outlook is the main factor that we see hovering over the market and that does not seem to be changing anytime soon. We may see some return of investment in commodities at the beginning of October when the fourth quarter begins. Oil may be on track for sub-triple digit prices and that will continue to apply downward pressure on commodities.

We broke long term support levels at 65 and this lead to some spec selling with scale down trade buying. We are getting some good fundamental support, but the technicals have turned negative and this week, we are crossing lower on the MACD. Considering the low open interest in cotton and the holiday mood from Ramadan, cotton is in a tailspin and will need some good sales or spec support in order to rebound.

We continue to test the lows and it is hard to say where the bottom may be, but it feels like it is close. This will depend on outside markets, but a short term bottom may be in place near the 63 cent level?

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