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Market gets some good fundamental support

12
Sep '08
Another inside trading day as the market has managed to hold the 63.50 low and bounce closely on either side of 64 as we await the news from the USDA tomorrow. Sales and shipments today were better than last week, but at only 138k we are not getting the demand we need to stop the bleeding in cotton prices.

However, we made good sales again this week and the report could be slightly friendly tomorrow and help consolidate a bottom. The big story at the moment is the weakness in grains which is still weighing on the market. Volume remains soft with 15,000 futures and 10,000 options, and open interest remains unchanged near 218k without any signs of increasing soon.

Cotton could be setting up for a much needed bounce, but we need to hold the current lows at the moment. The stock market managed a nice reversal today inspite of more bad news coming from the financial sector.

The break in oil is starting to have some positive effects on the economy as well as the stronger dollar. Tomorrows numbers from the USDA will be expected to be slightly bearish overall, but do not expect any significant moves in production or consumption until later in the 4th quarter.

We could be setting up for a 4th quarter rally in oversold equities, but commodities look like they may have more downside as the large Northern Hemisphere crops collide with reduced global demand.

We are holding the lows near 63.50 which is the same level K'08 bounced from earlier in the year. 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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