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Cotton futures touch new lows but rebound at close

19
Sep '08
The stock market continued to push lower early as we could not shake the fear and speculation even though the Fed took major global measures overnight to prop up the liquidity of U.S. dollars. This lead to a bounce in commodities but it eventually ran out of steam as grains slid based on further bank liquidations to generate capital.

However, the Treasury took a major step in stopping the bleeding by putting a stop to option uncovered selling of bank stocks which was a predatory move by large spec funds to keep pushing bank stocks lower. Volume was 39,000 futures and 25,000 options, as cotton made new lows but rebounded strong on the close.

Export sales from last week were close to 480k and shipments of 280k as we are definitely finding good demand with Z'08 near 60 cents. The rebound in stocks makes us feel that cotton and commodities may not get the liquidation pressure they have seen recently and might start to find some growing support. Gold made it all the way above 900 before coming off on the close.

Oil is working itself back up to 100 usd and grains were able to close off the lows. We lost a large volume of cert cotton in Galveston and had a large decert yesterday as stocks fall below 1.5 mbls. Sales have been strong and the fundamentals are tightening as technicals are starting to catch up.

We gave back a little today but managed to close almost back at unchanged. RSI is at 28 and we are finding good demand at the 60 cent level in Z'08. This will depend on outside markets, but the current financial crisis should pump money into the commodity sector.

The weak economic conditions are hitting Asia as well as Europe and there does not appear to be an end short term. Need to see how the global markets react overnight, but with commodity prices coming down 40% off the highs, we are getting back to better fundamental demand. The markets feel oversold and we could be forming a bottom short term.

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