Cotton -- Still Holding Resistance
Tuesday, October 24, 2006
by Donna Heidkamp of RJO Futures
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The bear market in the cotton tested resistance today as it hit
the high of 5041 today. The market traded relatively quiet trying
to break to the upside, but the momentum failed to hold as the
market made daily lows going into the close. As we have been seeing
all sorts of commodities making atypical highs for this time of
year, why is the cotton not joining the momentum of the grain
sector? Primarily the answer is Demand! We are
looking at cotton sales running 46% behind year ago levels. Why is
the demand for US cotton so low? After all, the US is the largest
exporter of cotton on the world market. In 2004, the world crop hit
a record of 120.39 million bales versus 116.19 million bales this
year which is the second largest world crop on record. Both India
and China are large producers of cotton and have both produced near
record crops as well. It is no big surprise that the demand for
cotton in China is solid. They just happen to have a lot of supply
to work through prior to coming to the US to purchase our goods.
According to Jurgens Bauer, a NYBOT floor broker in the cotton pit,
the only thing that will give upside momentum to this market would
be solid buying interest from China. At this point the trend is
clearly pointing down. The odds are in your favor if you stick with
the trend until it gives a clear sign of a reversal. Technical
support below the market is 4810, 4720, 4610, 4500, and 4270 basis
December cotton. Resistance can be found at 5050.
Chart
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About the author
My interest in the futures industry stems from strong family ties to production agriculture in Hereford, Texas. After completing a bachelor's degree in Agricultural Economics at Texas Tech University in 1995, I moved to Chicago to participate in the Chicago Mercantile Exchange Agricultural Broker Training Program. The program exposed me to all facets of the futures industry, enabling me to work with experienced floor traders and develop a strong understanding of the intricacies of trading in the futures markets.
Since completing the training program in 1995, I have continued to gain a well-rounded knowledge of the industry by working as an order clerk, trading desk manager, and broker for RJO Futures. In 2004, I started a branch office of RJO Futures to focus my efforts on helping clients meet their trading goals. By identifying client objectives, managing risk, and providing a carefully tailored service, I serve as a dedicated liaison on all trading floors to full-service, broker assist, and on-line clients. My commentary can also be heard regularly on CNBC TV and Bloomberg.
In order to continue to better serve my customers in an ever-evolving and dynamic industry, I also completed a M.S. degree in Financial Markets and Trading from the Illinois Institute of Technology in May of 1999.
RJO Futures is the retail division of R.J. O'Brien, one of the oldest FCMs tracing its history back to 1914.
To learn more about RJO Futures, visit rjofutures.com
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