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A new high for the move on Friday combined with the lower close could be a sign of a near-term top, as the market attempts to correct the overbought condition. Traders remain concerned with the slow pace of exports over the past few weeks, as old crop has rallied up from the mid-May highs during a period of continued cancellations of old crop contracts. More talk that there will be a major loss of harvested acres in Texas due to abandonment helped to support the market earlier last week. More than half of the state of Texas is experiencing “exceptional drought” according to the National Drought Monitor. News that a large commercial firm decertified more than 142,000 bales helped to support the old crop July futures. Certified cotton stocks deliverable against the exchange collapsed to just 52,035 bales as of June 1st, down from 194,715 the previous day. December cotton pushed to its highest level since April 7th on the session Friday, but a weaker tone for the stock market and profit-taking in cotton helped force two-sided trade, as there was talk of a short term overbought condition of the market. The reversal and lower close might attract some short term selling. Weekly export sales for cotton showed net cancellations of 46,000 running bales for the current marketing year and net cancellations of 27,300 for the next marketing year for a total net loss in export sales of 73,300 bales for the week. Cumulative cotton sales stand at 98.5% of the USDA forecast for 2010/11 (current) marketing year versus a 5 year average of 100.5%. Sales of 24,000 running bales are needed each week to reach the USDA forecast. The Commitments of Traders reports as of May 31st showed non-commercial traders were net long 43,162 contracts, an increase of 4,278 contracts for the week. The buying trend is seen as a short term positive force. Commodity index traders held a net long position of 48,160 contracts, down 1,007 contracts for the week.
TODAY’S GUIDANCE: The extent of any pullback should be minimal, as the forecast for Lubbock Texas shows no rain chances for the next week, and temperatures climbing to 101 Tuesday, 102 Wednesday, 100 Thursday and 100 Friday. The market is overbought. It could see a correction, but it should be minimal. China has a holiday today.
TODAY’S MARKET IDEAS: At this point, we cannot rule out a correction to 130.55 for December cotton with 151.26 as next upside objective.
Cotton: Could See a Correction, but Should Be Minimal
by Dave Hightower on June 6, 2011
Below is a sample of The Hightower Report’s 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!
A new high for the move on Friday combined with the lower close could be a sign of a near-term top, as the market attempts to correct the overbought condition. Traders remain concerned with the slow pace of exports over the past few weeks, as old crop has rallied up from the mid-May highs during a period of continued cancellations of old crop contracts. More talk that there will be a major loss of harvested acres in Texas due to abandonment helped to support the market earlier last week. More than half of the state of Texas is experiencing “exceptional drought” according to the National Drought Monitor. News that a large commercial firm decertified more than 142,000 bales helped to support the old crop July futures. Certified cotton stocks deliverable against the exchange collapsed to just 52,035 bales as of June 1st, down from 194,715 the previous day. December cotton pushed to its highest level since April 7th on the session Friday, but a weaker tone for the stock market and profit-taking in cotton helped force two-sided trade, as there was talk of a short term overbought condition of the market. The reversal and lower close might attract some short term selling. Weekly export sales for cotton showed net cancellations of 46,000 running bales for the current marketing year and net cancellations of 27,300 for the next marketing year for a total net loss in export sales of 73,300 bales for the week. Cumulative cotton sales stand at 98.5% of the USDA forecast for 2010/11 (current) marketing year versus a 5 year average of 100.5%. Sales of 24,000 running bales are needed each week to reach the USDA forecast. The Commitments of Traders reports as of May 31st showed non-commercial traders were net long 43,162 contracts, an increase of 4,278 contracts for the week. The buying trend is seen as a short term positive force. Commodity index traders held a net long position of 48,160 contracts, down 1,007 contracts for the week.
TODAY’S GUIDANCE: The extent of any pullback should be minimal, as the forecast for Lubbock Texas shows no rain chances for the next week, and temperatures climbing to 101 Tuesday, 102 Wednesday, 100 Thursday and 100 Friday. The market is overbought. It could see a correction, but it should be minimal. China has a holiday today.
TODAY’S MARKET IDEAS: At this point, we cannot rule out a correction to 130.55 for December cotton with 151.26 as next upside objective.
Tags: Cotton, Softs
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