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NY cotton futures continue to trade lower

08
Oct '08
After a nice overnight bounce, the market could not hold on to the gains and we eventually made it all the way back to unchanged and lower. There is still too much uncertainty out there and we continue to have panic selling as the investors are afraid to buy.

Global economic weakness and uncertainty will keep the markets in check until we get some sign of stability. This may arrive over the next six weeks as we keep pushing 5 year lows and the election in November could stimulate consumer confidence. Volume was average with 15,000 futures and 12,000 options, but open interest keeps falling as we are now below 190k.

Sales have been very strong this week as we bounce along the 18 month lows and mills are able to make money at these prices. We are seeing post Ramadan interest in Turkey and Indonesia and China is trying to fill year end quotas for cotton that must arrive before December 20th.

Some rain in West Texas was not a problem this week as most cotton is not open and temps are staying in the 70's. We can see good fundamental demand, but the technicals still look weak even though we are very oversold in the RSI at 25%.

The U.S. economic picture is still 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 a bottom in sight. The fear of economic slowdown is worldwide and the commodity prices are affected accordingly. We're trading in the 50's range and demand is strong for nearby shipment.

However, the decreasing world demand is keeping the buying hand to mouth. It looks very bearish technically and the MACD crossed downwards not long ago. Though it's not possible to pick a bottom yet, the deeper the drop, the sharper the bounce will be.

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