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The December contract fell to within one cent of its 100-day moving average yesterday, and this may be signaling that it is decision time for the cotton market. If the trend is going to turn lower, we are likely to see an acceleration to the downside by today or tomorrow. Otherwise, this is simply a test of support that will soon be followed by a resumption of the uptrend. The USDA will release its Planted Acreage report this morning, and it is expected to show an increase of near 350,000 acres from the 10.51 million projected on the March Planting Intentions report. Yesterday’s weak action in most commodity markets came on fears of a slowing of the economic recovery which could cause a ballooning in supplies of various commodities in late 2010 and into 2011. Cotton may stand out from this group in that it represents a market where stocks are expected to remain relatively tight into the end of the 2010/11 crop marketing year. While demand numbers could sag if there is a serious slowdown, middle classes in Asia are likely to continue growing, and that means increased world demand for basic consumer goods such as clothing, bedding and furniture. Yesterday’s negative economic news included an economic indicator in China that projected slower growth. This was followed by a sharp drop in the Conference Board’s index of consumer confidence in the US. That index fell to 52.9 in June from 62.7 in May. Weather forecasts through the end of the week continue to call for mostly light showers and some thunderstorms along the Gulf coast from Texas through Florida and into the SE along with hot temperatures. Heavier rainfall is expected right near the Gulf shoreline. There were no deliveries against the July futures contract for the second day in a row today. Total deliveries for the period so far stand at 985 contracts. Stocks registered for delivery against the ICE contract fell at a faster rate yesterday to 426,342 bales from the previous day’s total of 462,436 bales.
TODAY’S GUIDANCE: The eroding trading range of the past two weeks has taken the December cotton contract back near the middle of the broader range that was established from late April into early June. A push below 77.48 today could generate additional selling and a break below yesterday’s low at 77.04 would likely add to downside momentum. For now, we think near term support will hold, but it would be a good idea to be prepared for more selling. First support in the December contract is at 77.48 and then at 77.04. Resistance is at 79.07 to 77.20.
Cotton Market Commentary – 2010.06.30
by Terry Roggensack on June 30, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The December contract fell to within one cent of its 100-day moving average yesterday, and this may be signaling that it is decision time for the cotton market. If the trend is going to turn lower, we are likely to see an acceleration to the downside by today or tomorrow. Otherwise, this is simply a test of support that will soon be followed by a resumption of the uptrend. The USDA will release its Planted Acreage report this morning, and it is expected to show an increase of near 350,000 acres from the 10.51 million projected on the March Planting Intentions report. Yesterday’s weak action in most commodity markets came on fears of a slowing of the economic recovery which could cause a ballooning in supplies of various commodities in late 2010 and into 2011. Cotton may stand out from this group in that it represents a market where stocks are expected to remain relatively tight into the end of the 2010/11 crop marketing year. While demand numbers could sag if there is a serious slowdown, middle classes in Asia are likely to continue growing, and that means increased world demand for basic consumer goods such as clothing, bedding and furniture. Yesterday’s negative economic news included an economic indicator in China that projected slower growth. This was followed by a sharp drop in the Conference Board’s index of consumer confidence in the US. That index fell to 52.9 in June from 62.7 in May. Weather forecasts through the end of the week continue to call for mostly light showers and some thunderstorms along the Gulf coast from Texas through Florida and into the SE along with hot temperatures. Heavier rainfall is expected right near the Gulf shoreline. There were no deliveries against the July futures contract for the second day in a row today. Total deliveries for the period so far stand at 985 contracts. Stocks registered for delivery against the ICE contract fell at a faster rate yesterday to 426,342 bales from the previous day’s total of 462,436 bales.
TODAY’S GUIDANCE: The eroding trading range of the past two weeks has taken the December cotton contract back near the middle of the broader range that was established from late April into early June. A push below 77.48 today could generate additional selling and a break below yesterday’s low at 77.04 would likely add to downside momentum. For now, we think near term support will hold, but it would be a good idea to be prepared for more selling. First support in the December contract is at 77.48 and then at 77.04. Resistance is at 79.07 to 77.20.
Tags: Cotton, Softs
About Terry Roggensack