News Flash

Cotton trade slightly higher

22 Sep '07

2 min read

Cotton futures traded slightly higher in the morning as the market held up the lows @ 64.30 and only went higher during the day to close at new 9-week highs. Cotton gained over 2% just today and almost 4% on the week as the stock market closed with its strongest week of the year.

The Commodity index is at its highest level in over a year and energy/metals are setting record highs as well. There is just not stopping the bullish market tendency which specs are fueling and seem to have unlimited demand as the markets continue to push toward higher levels.

Volume was average at 25,000 futures and 16,000 options with friendly call buying on the close as well as outright Dec future buying to fuel the 40 pt rally after open outcry closed at 66.08. We can tell that U.S. new crop will have very little luck competing with foreign growths at current prices, so there is plenty of concern U.S. sales will be very soft for the next several weeks.

October futures should go off with very little fireworks with just over 1,500 in open interest last night. However, we are building total open interest over 220k which is closing back in on the record high near 236k set on the last rally. Cert stocks are rising, but it looks like the specs have room to buy as the scale up trade selling was not able to hold the market close under 65 cents as it had all week.

Based on uncertainty about new crop and further strength in the equity and commodity markets, there is agood chance that cotton has further upside with Z'08 blasting past its previous contract high of 73.50 to set a new high today at 74.50. Technically we also broke a resistance line at 65.00 cents which had held all week.

The close today, put the technical picture in a new range to go higher and RSI is still holding at 70 while it went as high as 86 on the last rally. Every way you look at the cotton market, we have room to the upside compared to the limits set on the last rally so the short term remains friendly.

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