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A mostly dry weather forecast for key producing areas of the US should help boost harvest progress and could cause some increased selling pressures. In addition, outside markets are causing a negative bias to commodity markets overnight. The USDA will issue its latest export sales figures this morning with expectations running well above last week’s disappointing total of 117,300 tonnes. Sales have been slow after the market saw a steady uptrend in the September to November time frame. Traders remain concerned that the US crop may be even smaller than the 12.5 million bales projected from the USDA last week due to wet weather issues and the slow harvest. Wet weather in the harvest period can reduce quality and sometimes yield. There was also talk yesterday that a smaller Brazil crop due to less planted area could lead to imports in 2010. The cotton market followed the general pattern in commodity markets yesterday to close moderately higher on the session. This included early gains bolstered by spec and fund buying that were sparked by a lower dollar and a new record high in the gold market. Prices then eased from the early highs into early afternoon. Harvest weather continues to be favorable from Texas into Alabama, and that is expected to continue for much of the next several days, but a moderate rain pattern is expected to move into Texas. Other areas to the east may remain dry well into the weekend or longer. Cotton stocks registered for delivery against the ICE No. 2 cotton futures rose to 428,039 bales from a previous total of 424,262 bales.
TODAY’S GUIDANCE: Weakness in stock markets overnight and continued consumer demand fears are seen as potential negative forces over the near term. Without some help from outside markets, cotton might be considered somewhat overbought. Open interest was steady yesterday, but it has come down to 170,527 contracts from 193,995 on November 11th. It will be important to see open interest stabilize or move higher to expect a resumption of the uptrend.
TODAY’S MARKET IDEAS: Another close over 72.55 for March cotton will leave 75.99 as next upside target with 72.05 and 71.48 as support. Uptrend channel support is at 70.95. Position traders might wait for a more significant break before entry.
