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Market trades lower

18
Oct '08

The market held the low from yesterday and followed through with a strong limit up move which also traded synthetically higher. It does seem that the fundamental support under 50 cents has been effective in establishing a short term low.

The 3 year support line we bounced off yesterday seems like it will hold up at 45.50. Volume was better than average at almost 15,000 futures as well as 16,000 in options. The outside markets are still very important to holding this low and even though volatility is high, we may be ready to move higher.

Demand has been very strong over the last 2 weeks and we have found fundamental support for cotton even for shipments into the first quarter at fixed prices.

Export sales were very strong today at 400k and shipments of 240k. This trend will hold into next week as well since there was quite a bit of cotton sold this week. With all of the oversold signals, the markets seem to be putting in a bottom here, but there is plenty of uncertainty out there and this will not be changing any time soon.

Taking a look at the COT report on page 2 shows the trend of liquidation longs by the index and non-commercials continues to take place.

The U.S. economic picture became a bit brighter this week as the stock markets found some support and this may lead to a commodity consolidation. MACD is starting to turn north for the first time as we have reached heavily oversold signals which are due for a bounce.

Energy and grains also put in lows today but closed higher as the dollar came down on the close. There will certainly be plenty of volatility going forward as everyone agrees that we are not out of the woods yet, but we are seeing a small trend to buy dips instead of sell rallies as there is some demand to buy with volatility at all time highs.

Ecom USA

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