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The market remains in a significant overbought technical condition after recent strong gains. A drier forecast for the southern growing areas failed to pressure the market much yesterday as a cold weather snap for West Texas with temperatures down to the mid-40’s overnight was seen as a supportive force as the crop in Texas and most of the US crop is behind a normal maturity pace and cool weather does not help. A warmer trend into next week may help ease crop concerns. In addition, there has been a steady flow of moisture moving up from the gulf which has helped to support quality concerns. However, it does look a little drier ahead. December cotton pushed moderately higher on the session and experienced the highest close since July 20th. A strong recovery in grain markets on the session and continued concerns for quality issues for the crop in the delta and the southeast in areas which received too much rain recently (like parts of Georgia) helped provide underlying support. Solid gains in the stock market added to the positive tone. Retail sales news was supportive last week for the cotton market from a demand perspective and traders see a recovery in world demand for the coming year. Traditional technical indicators remain in an overbought status. Traders will monitor financial markets for direction as the market has recently followed the stock market closely. The steady rise in open interest on the recent run is seen as a positive force.
TODAY’S GUIDANCE: The extreme short-term overbought condition and a somewhat bearish weather forecast could support choppy to lower trade in the short-term. Resistance for December cotton comes in at 64.50 with 61.78 and 60.87 as support on a set-back. There is light uptrend channel support today at 62.85.
TODAY’S MARKET IDEAS: Look for choppy to lower trade ahead as the market corrects the overbought condition.
