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Unless there is significant damage from the crop in the delta for the rains of the next two days, the cotton looks vulnerable to a significant set-back in prices in the next few weeks. Absorbing the harvest and searching for a price level which is low enough to stimulate export demand are factors which may weigh on the market. Traders are looking for cotton weekly export sales near 50,000 bales from 72,600 bales last week for this mornings USDA weekly sales update before the opening. We need 149,000 bales per week to reach the USDA projection and total usage estimates from the USDA are already at a 24 year low so these are not pumped up projections. December cotton closed slightly lower on the session yesterday but well off of the early lows. The market experienced a successful test of Tuesday’s lows before finding support just above the lows and the late rally was impressive in the face of a strong dollar and negative action for equity and energy markets. News of heavy rains in the forecast for the delta into the weekend helped to support as quality issues could re-emerge due to the slow harvest. Cotton has also followed the stock market recently and the sharp break in the US stock market could begin to pressure.
TODAY’S GUIDANCE: A move under 66.10 for December cotton could be enough to spark some increased long liquidation selling from fund traders. Open interest is up 40,000 contracts on the rally this month alone so a move under this level could spark increased selling with support at 65.05 and 63.98. Close in resistance is at 67.35. The short-term trend looks down unless the market sees significant help from outside market forces.
TODAY’S MARKET IDEAS: It would take a close back over 68.20 to turn the trend higher.
