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Cotton futures markets continue slipping

07
Oct '08
The market continues to slide lower following the weakness in outside markets. We are just seeing panic selling at this point which was obvious after the limit down opening and when option volatility rocketed up to 50% which showed the desperate put buying entering the market.

We have to see some stability in the equity markets worldwide before we can get any new money coming into the oversold commodity markets. The USD is the only green spot on the board as well as gold which normally move inversely, but now there is a flight to secure assets. Volume was above average with 16,000 futures and 18,000 options as open interest keeps falling.

We traded below limit today synthetically almost 50 points lower at certain points in the day and will have to see how the overnight markets react to see if this follows through tomorrow. The spec position decreased from .7% long to 4.7% short this week which goes to show that we continue to see spec liquidation of longs and adding new shorts.

This trend does not appear to be changing anytime soon, but we have reached a level of strong mill demand and just have to wait and see if the specs get on board before the end of the year.

The U.S. economic picture is looking bearish and uncertain even with the bailout plan in effect. The weak economic conditions are hitting Asia as well as Europe and there does not appear to be an end nearby.

The fear of economic slowdown is worldwide and the commodity prices are affected accordingly. We're trading in the 50's range and demand should come in at this level. However, the decreasing world demand proved to the opposite.

It looks very bearish both fundamentally and technically and the MACD crossed downwards not long ago. Though it's not possible to pick a bottom yet, the deep the drop, the sharper the bounce will be.

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