US cotton futures have been plagued by low volume the past week as though traders are comfortable with the level of their longs or shorts, if only for the moment. A year ago and in 2011, March was a defining moment as the seasonal highs occurred during that month so some caution is not only understandable but certainly warranted.
As has been the case recently, the May contract found sufficient support at its 10-day moving average in Thursday’s trade. At some point, a larger break may unfold but the same buying discussed in the past from new export purchases and mill fixations will prevent a collapse.
The recent push above 93 cents has caught the attention of any number of spec funds. Without question, there are buy stops above 9375 (the Mar 13 high) and stops on the close, should the seasonal high of 92.93 from earlier this week be taken out.
Thursday’s May contract close of 92.18 is 1 tick below last Friday, March 14, and with the end of the month only 10 days away, this month’s close should easily top the February 28 close of 87.14.
There is a lot of news not only anticipated but reflected in current values such as a drop in US production in the upcoming ginnings report due out Monday, March 24, and a sizeable 4% increase in 2014/15 plantings per the upcoming NASS intentions report due out Monday, March 31.
A smaller drop in the former or larger increase in the latter would be disappointing to prices.
The price range involving the May contract the past week has been similar to the previous, so a positive net sales export report is likely next Thursday, March 27.
The sideways mode of old crop futures and light volume has my technician holding a ‘mixed’ view for the moment, waiting for more clarity. However, as long as the May or ultimately Jul contract remains above its 50-day, there is no change to the longer term bull story.
Moving forward, weather will become increasingly critical for new crop.
Sharon C Johnson, @Copyright 2014
The views and opinions offered in this report are solely those of Sharon C Johnson, an introducing broker for KCG Futures. The information contained in this report is taken from sources she believes to be reliable but is not guaranteed as to accuracy or completeness and is sent to you for information purposes only. Reproduction in whole or in part or any part or any other use without permission is prohibited.