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Cotton market trades higher

25
Nov '08
The overnight equity markets in Asia and Europe were friendly as was expected and this put pressure on the USD and allowed commodities another good strong rally. Cotton locked up the limit after a strong opening and actually traded 50 points higher synthetically.

There is good demand for the Z'08 with 6,200 contracts open and which look like there will be additional cotton delivered to the strong takers after 1600 have already been stopped. Grains, metals and energy all benefited from the weak dollar today as we tested the bottom of the dollar range at 86.50 and went through it. Volume was average today with 16,000 futures but there were 12,000 bullish options reported during the day.

H'09 formed a double bottom just under 40 cents last week and the DJI has been up 12% in two days so this also is helping spur the rally in cotton over 10% higher from the lows. We have a short trading week with the markets closed on Thursday, but they will reopen on Friday. There was more positive news regarding the financial crisis as Obama and Bush both made positive statements and there was a plan put in place to shore up Citi bank which rallied almost 60% from the lows.

Have to see how much more downside the dollar will have, but the CRB index was up strong and we will need to see this rally hold in the stock markets in order to keep this trend going.

Technically we are starting to move sideways with support under 40 cents. The stock market bounce today will be a big help in seeing higher cotton prices if it can hold this week. The dollar could not get through the resistance at 88.50 and this was supportive for commodity prices and may have more support next week.

The new administration is naming people who will be the new players in the financial crisis and this may help the short term outlook.

Ecom USA


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