Asia and European markets opened higher and this lead to firmer commodity prices and a weak dollar. Cotton took advantage and also was up strong overnight. We are now in the middle of the trading range for the H'09 (40/48). We expect to see some more upside follow through overnight especially after such a good close on the DJI. However, over 9,000 we may start to see some profit taking and the dollar is close to its support line at 85 as we closed at 85.7.
Volume was light all day as the open interest remains on the lows and demand is hand to mouth.
The USDA S&D report comes out Thursday but we do not expect any big changes. The markets keep following each other so unless we see a big move higher in the stock market, the upside may be limited. Oil, grains and metals are all in a upside patter after 9 out of 11 up days. The dollar keeps struggling in a narrow range and the concerns about the long term remain.
Cert stocks remain at 900k and open interest at 130k is part of the reason we are getting so many limit moves. We just do not have the liquidity to satisfy the demand and this keeps us swinging sharply under high volatility.
Technically the dollar is establishing a sideways trading range between 85/88. After the ECB announcement last week, the dollar did test the highs near 88, but eventually came down hard. The stock markets also started the week and seem to be heading for a strong finish after such a poor performance over the last 6 months.
Cotton is starting to build a sideways trading channel 40/48 as we may be testing the bottom of the range for the short term. RSI at 45 and the moving averages are getting closer so we may keep trading sideways.