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The market has consolidated during mush of November and December and more and more traders seem to be calling for a longer-term low and uptrending cotton prices in 2009. While a rally looks possible, the first quarter could still offer more negative demand news before the economy and especially before discretionary spending picks up. “If” the market was building a base of support in the past six weeks and was poised to begin to move higher, open interest should be building up on the recent rally. However, open interest was at 151,494 contracts at the November low and 130,295 contracts at the December low and is now at 124,043. In addition, consolidation is normally considered a “continuation pattern” and this would suggest a continuation of the downtrend into March. March cotton traded on both sides of Tuesday’s close yesterday while remaining in a narrow range. Traders said that the cotton market responded to the mixed signals from the dollar and crude oil while largely ignoring strength in soybeans and the grains. Volume was light and so was activity by funds.
Economic news was negative with new and existing housing sales below trade expectations along with Regional Manufacturing. Home furnishings and bedding is a significant portion of the cotton demand in the US and this sector is extremely slow. Third Quarter GDP was down 0.5%, about as expected. These numbers brought moderate pressure to the stock market which simply confirmed trader’s fears about demand destruction for consumer goods. China imports of cotton for November were 76,141 tonnes, the lowest monthly total in about four years.
The US Census reported that November cotton consumption was 285,480 bales as compared with 333,164 in October and 343,479 bales last year.
