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The surge in open interest off of the March 9th lows suggests that shorts are not budging and longs are building a position. Open interest has jumped from 118,447 contracts to 141,782 yesterday. However, the short-term technical indicators are quite overbought and the market does not seem to have supply issues at present. In fact, the improved weather in Texas and the higher than expected planted acreage forecast in the past week may be seen as somewhat limiting factors on the upside. An apparent turn in the housing market is seen as a positive development and the very strong export sales pace is also seen as a positive development as well. May cotton closed slightly lower on the session yesterday after an early rally to the highest level since February 12th failed to attract new buyers. Ideas that the market is overbought and better soil conditions in Texas after recent rains helped to pressure. December cotton closed higher but well off of the early highs. Weekly export sales were better than expected and came in at 403,200 running bales for the current marketing year and 22,900 for the next marketing year for a total of 426,100. As of March 26, cumulative cotton sales stand at 100.0% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 85.1% for this time of the year. Export shipments for the week reached 297,900 bales which is a new marketing year high and should help relieve some of the fears that some sales would be canceled.
TODAY’S GUIDANCE: Economic news could cool the inflationary buying demand for the short-term if unemployment news is even worse than expected. December cotton close in support comes in at 50.44 with better support at 49.90. Use 54.30 as next upside target.
TODAY’S MARKET IDEAS: New buyers can wait for technical correction from overbought condition.
