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Cotton futures markets touch new lows

10
Oct '08
We had a bit of a bounce overnight, but this failed to hold as we set new lows again today. We did see the stock market show an early bounce after the Asian and European markets were up overnight. However, the market struggled to hold the gains and eventually went under unchanged and by 3:00 Eastern Time the bottom fell out and we hit new lows under 9,000!

We've have had a very volatile week and even though the U.S. stock market could not put in a positive day, it is approaching a very strong support level at 7500 which may get tested very soon. Volume was very light today with only 8,000 futures and 4,000 options as we managed to close right at the Z'08 contract low.

We got an average export sales report today of only 250k in sales and shipments which was not what the doctor ordered to trigger some support for a collapsing cotton market. The fundamental case for a bottom in commodities is strong, we just need to stop the bleeding in the financial sector and equity markets.

There is a USDA report coming out Friday which also may have a friendly tone as we look for signals which could support the market at these oversold levels. The stock market as well as commodities just feels overdone and we are due for a bounce.

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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