A crazy week in all the markets as we traded in over a 400 point range in cotton and 1,000 points in the DJI and managed to close almost back at unchanged. There was fear and speculation over the bad debt in large investment banks as Lehman Brothers declared bankruptcy to start off the week.
After several big decisions by the Fed and Treasury department, we eventually got a sense of stability in the markets and had a big correction from the lows over the last two days.
Commodities have benefited from the extra volatility in stocks and also seemed to put in a bottom this week. Volume in cotton was back on the low side with 12,000 futures and 5,000 options as open interest has also reached a new 12 month low.
Looking at the COT report on page 2 in attached PDF, we don't see a big change in spec or trade participation. Weather is still a concern for the Northern Hem crop as we get closer to harvest. Cool wet weather has been an issue in several parts and we do have late crops that will be susceptible to early freezes.
Cert stocks have come down over 200k from the highs and we have been getting good demand and contracting a high volume of business on the break in the market these lat two weeks. If anything commodities in general feel oversold and due for a testing of the upside.
Outside equity markets will have a major effect, but if we can hold this bottom and start to build a base, energy, grains and metals should continue to rally and the dollar could fall some more.
Cotton did not make back all the loss from this week but came close. RSI is at 28 and we found 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 next week, 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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