Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
Today is a light news day in cotton, and in other commodity markets as well for that matter. Yesterday’s economic numbers were mixed with pending home sales jumping to a 3-year high, construction spending flat and the Manufacturing Index coming in below expectations, but still indicating expansion. The rain system that started in the lower Delta yesterday has moved north and east as expected through the Deep South and into the SE and mid-south. This is causing some further harvest delays to cap off a slow year, but none of this is considered new or newsworthy at this point in the harvest. The International Cotton Advisory Committee said yesterday that the 2009/10 world cotton crop will fall 5% to 22.2 million tonnes, and that this will be the third year in a row that world production has declined. They said that India and Pakistan would see higher crops while the US is down slightly and they lowered China’s crop by 16%. The USDA has also shown small decreases in estimated production over this period with the biggest drop coming in 2008/09. (Note: The USDA estimates production in 480 pound bales. One metric tonne is 2,204.6 pounds.) Deliveries against the December futures contract were zero this morning with the three day total still at 310 contracts. Cotton stocks registered for delivery against the ICE No. 2 cotton futures were on the rise again yesterday after a 1-day dip. They rose to 453,579 running bales from a previous total of 452,420 bales.
TODAY’S GUIDANCE: March cotton has either made a new high for the year or taken out the previous day’s high in 4 of the past 6 days prior to the overnight session. All of this has come with no subsequent follow through to the upside. On the other hand, volatility has not increased near the recent highs and setbacks have been one day affairs. This may indicate that the market will pause for a bit longer, caught between support from fund buying and the negative effects of a still-sluggish US economy. The market recovered part of yesterday’s loss in the overnight session, and price action for the rest of the day may tell us whether we will stay in a narrow range near the recent highs, or turn lower. We are inclined to believe there will be a continuation of a narrow range. Light first support is still at 73.39 in the March contract with the next support near the 71.50 to 72.00 area. First resistance has dropped a bit to 74.50 to 74.68 with the next resistance at 75.50. However, even if this resistance is taken out, it might not be a signal that another leg up is getting underway.
