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Cotton Market Analysis

The market saw a nice recovery off of last weeks lows but the upside appears limited due to a heavy supply outlook. The oversold condition of the market plus better than expected demand from China and from trade houses on the move under 90.00 helped to support. In addition, there is more talk that the export cancellations have died down and that the large export sales on the books could cause the USDA to raise their export forecast and lower their ending stocks forecast for the 2011/12 season in the March supply/demand report. China futures closed a bit higher overnight following the US market higher. May cotton closed sharply higher on the session yesterday as supportive news from outside market forces such as higher trade in equity markets and a weaker USD helped to support. Traders see declining planted area for China (6-10%) and also for India for the coming season as potential positive forces. India industry executi es believe planted are may be down 5-10% as lower cotton prices and better margins for oilseeds and rice helped to pull acreage away from cotton. Talk of end of the month short-covering plus higher trade in grain markets were seen as positive forces yesterday. Certified cotton stocks deliverable against the New York contract increased to 136,523 bales which are up from 134,524 bales the previous session and up from 45,700 bales near the end of January.
The outlook for increasing ending stocks for the US and the world for the 2012/13 season should help keep a lid on technical rallies and could help pressure the market if outside market forces turn less supportive.

Technical Analysis

COTTON (MAY): The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The close above the 9-day moving average is a positive short-term indicator for trend. The market’s close above the 2nd swing resistance number is a bullish indication. The next upside objective is 93.98. The next area of resistance is around 93.23 and 93.98, while 1st support hits today at 91.25 and below there at 90.01.

 

StockMarketNews Research Team 

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