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Cotton trades higher

03
Dec '08
Cotton made a run at the 48 cent high in H'09 on strength from outside commodities and equity markets. However, after some scale up trade selling and other bearish options based H'09 forward, the market eventually came down. The USD made a small run late in the day but also came off near the close.

Treasuries remain strong as it seems the Fed will keep buying the paper and pushing the yield lower. Grains, metals and energy all came down as well as there just does not seem to be any strong buyers at the top of the range. Volume was low with only 7,000 futures and 13,000 options while open interest remains weak.

Cert stocks are near 900k and falling so this could be friendly long term and the loss of contango is another positive factor that may draw specs back into cotton which has now lost 50% of its open interest in just over 6 months. However, we need to see some stability in energy that may spillover to grains and softs. The short term does not look like that will happen and the USD does not want to come down either, so for now commodities look like they may test the downside again before year end.

Business has also gotten slow but the technicals are still showing a bottom may be in place and just have to wait and see if that is the case.

Technically the dollar is establishing a sideways trading range between 85/88, as we are seeing resistance above 87. The new administration is naming people who will be the new players in the financial crisis going forward and this may help the short term outlook.

The stock market bounced on some potentially good news coming from the auto industry and some profit taking after such a big loss yesterday. Cotton is holding up technically and have to see if we can get the moving averages to cross.

Ecom USA


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