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After the weak close yesterday, another move lower today could spark some heavy selling by spec longs and trend-following funds. The gloomy economic outlook is lowering demand expectations for cotton, as new clothes and home furnishings are expected to be low priorities during times of economic uncertainty. While there is a potential for tight supplies next year due to declining plantings and there are hopes that the stimulus programs being enacted across the globe will spark a stronger demand, these are potential longer term developments, while economic worries threaten demand over the near term. May cotton moved to its lowest level since December 12th yesterday, as another round of bearish action in the stock market translated into growing concerns for cotton demand and helped pressure the market late in the day. The market was supported early from solid export sales news last week and a strong stock market overnight. However, a sharp break in the stock market and a surge higher in the US dollar helped spark the selling. Weak export demand could occur with the dollar strength, and demand numbers could still show further revisions lower in upcoming supply demand reports. A lack of new fundamental news kept the volume low. Certified exchange stocks increased to 196,507 from 192,125 contracts the previous session.
TODAY’S GUIDANCE: The technical indicators are oversold, but attracting new buyers (and even avoiding aggressive selling) will be difficult if the stock market stays under pressure.
