Weekly Cotton Technical Outlook
Updated by Jobe Moss as of 07/18/08
The Information contained in the letter has been compiled from sources believed reliable however, it cannot be guaranteed as to its accuracy or completeness. This letter does not constitute a solicitation by MCM, Inc., or any of its employees to buy or sell any commodity futures or options, and the information contained herein is provided for informational purposes to MCM clients only.
Each week we will attempt to apply our best technical analysis to the cotton futures complex using Elliott Wave analysis. Out objective is to keep our customers on top of the next major move in cotton prices. We hope you find this this publication helpful in you trading decisions, and hope you will take the time to E-mail us with any suggestions that you might have on how we improve our publication.
MCM-Daily Cotton Index
ICE spot cotton futures ended lower last week in a narrow low volume week of trading. Surprisingly, the market finished the week with only a modest loss despite a hemorrhaging energy and grain complex. One would think that the cotton market was actually showing some real strength under the circumstances last week. However, it may be just apathy and a general lack of interest in trading cotton right now. Last week's trading volume was extremely light and trading ranges were very small compared to what we have seen earlier this year. It looks as though the dog days of summer have arrived in the cotton market right now. We have seen prices fall from their temporary lofty levels this Spring to their current more fundamentally rational levels however, business has not reflected this decent. Yes, exports sales have picked up slightly but, not to the levels needed to provide any real buoyancy to the futures. We suffered acreage losses in Texas, along with very poor growing weather for the start of that crop, and unfortunately that has not provided any real lift for the market. As we move forward from here growers are going to faced with a real deleima. Do they continue to attempt to grow 70 cent cotton under these circumstances, or do they switch to more revenue and expense friendly crops such as wheat and sorghum? Most likely the answer will be the latter. Obviously, in time this transition by cotton growers to grains, which I believe will occur worldwide, will spawn the next bull market in cotton. However, until then we are left to deal with our current cotton market situation. A grossly over supplied, under consumed commodity market which can't seem to find its way. Export sales last week improved reflecting the recent decline in prices. Old-crop sales totaled 56,800 bales, up 6 percent on the week with the biggest sales going to Asia New-crop sales for 2008/09 delivery were 282,700 running bales, with all sales going to Asia. Last week the CFTC released its weekly COT report showing a continued decline in net non commercial long positions, moving their net long holdings to 22,118 contracts. This is the lowest net long position we have seen in over 6 months. The total open interest increased slightly last week showing a 383,575 net figure for futures and option combined. The December cotton as support has support at $72.50, $71.91, $71.58, and $70.86. Key resistance areas in the July futures are $74.20, $75.20, and $78.45.
Trade Recommendations:
New Position:
Open positions:
Long 1 December cotton @ $75.30. Long 1 September 75 put option @ 4.72.
Long 1 September 75 call and Short 1 September 82 call @ $1.90 premium the 75 call.
Fundamental News:
Government prices, good through next Thursday, July 24th, 2008 are: AWP, $63.43 - $.19 and LDP, (0).
Export Sales reported 07/17/08
Total net upland cotton sales came to 339,500 running bales, which were within trade expectations of 250,000-375,000 tons. Old-crop sales came to 56,800 bales, up 6 percent on the week with the biggest sales going to Asia. China bought 15,300 bales, Hong Kong bought 8,000 bales, and Taiwan bought 7,000 tons. New-crop sales for 2008/09 delivery were 282,700 running bales with all sales going to Asia. China bought 183,900 bales, Indonesia bought 31,400 bales, India bought 13,400 bales, and Thailand bought 11,400 bales.
ICE Certificated Cotton Stocks: Updated 07/18/08
Last Updated on 18-Jul-2008
Delivery Point Stock
16-Jul-2008Stock
17-Jul-2008Decert
17-Jul-2008Non-Rain Grown GALVESTON, TX 165637 165637 0 0 GREENVILLE, SC 196226 196227 0 0 HOUSTON, TX 39016 39112 0 0 MEMPHIS, TN 1280816 1281998 311 286 NEW ORLEANS, LA 32108 32108 0 0 Totals: 1713803 1715082 311 286 The number of bales in both certificated stocks and CCC loan as of 16-Jul-2008 is 0.
NOTE: Issues by the USDA are not included in the daily certificated stock totals, and are reported for informational purposes only. The daily stock totals for each delivery point reflect the actual certificated stocks, including new certs and decerts, as reported by EWR, Inc.
USDA July 2008World and U.S. Supply and Use Table for Cotton 1/ Million 480-lb. bales
Crop Year Output Total Supply Trade Total Use Ending Stocks World 2006-07 121.99 184.38 37.19 123.32 62.98 2007-08(Est.) 119.91 182.90 38.85 124.25 61.26 2008-09 Prom. June08 116.43 178.25 40.87 127.16 54.09 July08 114.94 176.20 39.89 125.91 53.24 United States 2006-07 21.59 27.68 13.01 4.94 9.48 2007-08Est.) 19.21 28.70 13.90 4.60 10.20 2008-09 Prom. June08 14.50 24.72 15.00 4.30 5.40 July08 14.00 24.22 14.50 4.40 5.30 Foreign 2006-07 100.40 156.71 24.18 118.38 53.51 2007-08(Est.) 100.71 154.20 24.95 119.65 51.06 2008-09 Prom. June08 101.93 153.53 25.87 122.86 48.69 July08 100.94 151.99 25.39 121.51 47.94 COT LOOK Cotton Index for the week ending 07/18/08
"A" Index' "A" Index (fwd)
77.05 down 3.35 79.25 down 1.55
Commitment of Traders Report Link
Closing prices for Friday 07/18/08
Contract High Low Previous Close Change Oct '08 71.18 69.71 70.29 70.35 +6 Dec '08 74.16 72.50 73.11 73.24 +13 Mar '09 79.55 77.91 78.53 78.64 +11 May '09 80.80 80.13 80.34 80.38 +4 July '09 81.70 81.70 81.69 81.63 -6 Oct '09 ---- ---- 84.03 83.93 -10 Dec '09 85.43 84.75 85.54 85.42 -12 Mar '10 ---- ---- 87.09 86.97 -12 May '10 87.50 87.50 88.09 87.97 -12 Jly '10 ---- ---- 90.04 89.92 -12
TECHNICAL: Our spot weekly futures preferred analysis label the the June 3 low of $63.10 as the completion of an "ABC" "A" wave of a much larger "ABC" corrective structure. The rally and decline from the June 3rd low has been labeled as waves "(A) and (B) of the larger "B" wave corrective rally. Obviously, the change over from the July contract to October has had a profound positive affect to our weekly and monthly charts. The result has been our weekly chart painting a bullish hook reversal, coupled with a double bottom formation. Last week's price action merely left us with a weekly inside bar, offering little in the way of new technical indications on our chart. Our monthly chart painted a retest of last month's low, and a rebound and close near the high for the month, so far. Our daily analysis, based on the December futures, labels the price action since the $70.86 low as the wave "1" rally and wave "2" decline of the "(C)" wave corrective rally. This analysis assumes that the decline to the low of $70.86 was an irregular "(B)" wave, of the "(ABC)" "B" wave corrective structure. Our alternate count suggests that the "c" wave decline is still in effect, with the sideway's prices action seen last week being the wave "4" of that "c" wave decline. Last week the market experienced a "full moon phase" leaving us with a FMP range of $74.20 to $71.91. A breakout of this range should signal the next price move for the December cotton. The December cotton as support has support at $72.50, $71.91, $71.58, and $70.86. Key resistance areas in the July futures are $74.20, $75.20, and $78.45.
MCM Technical Trend indicator: ( Note: All trend directions and price projections for cotton are based off of the spot futures. At this time our spot futures is the October contract.
Daily Trend - Down (Trend started 07/01/08)
Weekly Trend - Down (Trend started 07/03/08)
Monthly Trend - Neutral (Trend Started 6/30/08)
Monthly Cotton Futures
Weekly Cotton Futures (Preferred Count )
October08 Cotton Futures
December08 Cotton Futures
March09 Cotton Futures
December08 vs. March09 Cotton Futures
December08 vs. May09 Cotton Futures
December08 vs. July09 Cotton Futures
July09 vs. December09 Cotton Futures
