Cotton market stoops low on Thursday

24 Oct '08

2 min read

Cotton is generally weak and choppy Thursday session. The low was yet again tested at 48.81 basis Z'08, but good support was found under 49 cents. There is some feeling the low hit last week at 45.66 should hold up in the short term as we are seeing some consolidation taking place here in commodities and equities.

All months bounced back up on the close except the December contract, which caused the spread to widen. The Z'08/H'09 spread has narrowed during the past few weeks to the 260 point area, but settled at the decent 430 point level today. Good volume of rolls came in with the spread going out.

We are seeing good scale down mill demand when we get the front month under 50 cents. This equates to landed prices in the low 60's where mills are comfortable covering the end forth quarter '08 and early first quarter '09. The mills are still hand to mouth and not chasing this drop too far forward. Outside markets will still be important even though cotton has divorced itself somewhat over the short term. The dollar is also very strong and keeping the commodities in check while the equity markets keep suffering from the financial uncertainty.

This morning's export report was decent with 313,700 running bales in sales and 229,000 bales in shipments.

Technicals are starting to look better after a few up days last week and a nice bounce back at the beginning of this week. MACD is starting to turn north for the first time as we have reached heavily oversold signals which are due for a bounce. RSI is at 35, but the fundamental picture looks good and we are starting to stabilize in grains and energy prices.

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 these all time highs.

ECOM USA Inc

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