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Cotton market trades lower

17
Sep '08
We continue to ride the meltdown in financials and the liquidation of any assets with value which include mostly commodities. AIG was the new flavor of the day as the market continues to hold their breath waiting for the next shoe to fall.

The only good news was that the Fed basically decided to let this market work itself out and not try to offer any short term artificial relief by cutting rates. It looks as if they will hold the rates stable at 2% for possibly the balance of the year.

This gave the dollar a bounce and could possibly have some long term healthy effects on the economy and the markets. Volume was above average today with 35,000 futures and 28,000 options as volatility rose and there was a wave of downside protection buying today which further beat up the market.

Grains metals and energy continue to slide lower as we are seeing profit taking and panic selling takes over the commodity markets even though we are seeing good fundamental support. There are estimates from some that we could get Dec'08 under 60 cents if we continue to see a lack a spec support and mill demand.

We are in the very bearish seasonal pattern which may extend a few more weeks until the middle of October. However, we need to see a bottom in the stock market meltdown to reduce the panic selling in the commodity sector. Until this happens, cotton as well as all other commodities will keep falling lower.

We broke the lows today as there seems to be no bottom in sight short term. We are getting some good fundamental support, but the technicals are still negative. 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 the current financial crisis is forcing banks to liquidate commodity positions which will lead to more downside under the weak economic conditions worldwide.

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