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!
Two weeks of holiday-curtailed trading action will come to and end today along with the year, 2009. The New Year will start with expectations of continued fund buying in all commodity markets. It will also start with a far more positive economic outlook than we saw at the end of 2008. Whether these expectations will be borne out by the markets is, of course, another question. In recent weeks, cotton has made a new high for the year and followed with the same general consolidation pattern we have often seen following a new high over the past several months. Export sales have improved, running above the average total needed to reach the USDA’s export projection for the year for several weeks in a row. We are likely to see another such number on the morning’s Export Sales report. This week brought news that China’s 2009 production was lower than expected by as much as 10% compared to the latest USDA estimate, and there were indications that Chinese cotton demand and imports may be higher than previously estimated. All of this reinforces projections of declining stocks in the 2009/10 marketing year. That should make cotton an attractive investment for traders who are looking for places to park some capital. Stocks registered for delivery against the ICE No. 2 contract rose to 409,936 running bales today from the previous total of 406,291 running bales. The start of a new trading year can often bring an entirely new trend to a market. However, the evening up process in recent days seems to be indicating that traders were not leaning to the long side in cotton as 2009 came to an end and, on balance, that is very supportive. The test of the bullish case in early 2010 will probably boil down to what the funds do. If they continue to buy, other traders will follow suit and there will another round of new highs. If fund buying is light, or if funds are consistent sellers in the first few trading days of the New Year, a setback of as much as 10.00 cents would be possible in fairly short order.
TODAY’S GUIDANCE: For now, the combination of investor interest in commodities, the positive economic outlook and the ever-tighter supply outlook for 2010 suggest that the market trend will remain up. First support dropped a bit to 74.78 in March cotton yesterday with next support remaining near 73.72. First resistance remains at 76.58.
TODAY’S MARKET IDEAS: The cotton market seems determined to stay near the center of the 74.00 to 76.00 cent range into the end of the week. That leaves us with little opportunity to buy ahead of the New Year. Stand aside.
