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Market volume weak on Sept 23

24
Sep '08
The dollar bounced back today amid debates over the rescue package to stabilize the banking sector. Commodities pulled back across the board after a big up day on Monday. There just does not feel like we have the same buying momentum as we had in the first half of the year. However, the momentum feels more positive and we should keep testing the upside over the short term.

The uncertainty over the banking sector keeps the dollar on the defensive and commodities will benefit, but the upside will be limited. Volume was weak again today with only 11,000 futures and 6, 000 options as open interest keeps falling closer to 200k. We topped out today at 64.25, but grains had closed lower overnight and we felt like the market was due for a pull back after gaining almost 400 points from the lows.

Demand has slowed down at these levels, but the technicals are friendly and could keep the upside momentum rolling. Sales should be good on Thursday and if outside markets stay positive, we should see cotton keep testing the 65 cent level. However, there seems to be a lot of upside resistance so the long term looks like this move will eventually fail just like the others.

Technicals are starting to turn positive and we certainly were due for a bounce after grinding below 60 cents last week. RSI is at 30 and we found good demand at the 60 cent level in Z'08 so this recent bottom should hold up over the short term.

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 nearby.

Need to see how the global markets react this week, but with commodity prices bouncing hard on Monday, it looks like we are in for a short term correction in cotton which could try and test resistance at 65/68 cents.

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