Cotton futures have sold off in November as traders are concerned about the effect the economic slowdown may have on demand for ’08. This selloff bottomed around 63 cents, well above the harvest low of 60 cents in August. The grain markets have been rallying into new highs in December, stoking fears that cotton is going to lose acreage to pricey corn and beans in the SE US next spring. We may be seeing the beginning of cotton’s “bidding for acres” for next year, and the Fed’s rate cut yesterday is increasing interest in “inflationary” commodities.
Today’s rally is testing broken support at 6525, and MACD is poised for a bullish crossover. Momentum (the bottom panel of the chart) dipped below the zero line, giving a buy signal today. A close over 6525 should encourage further rally, with 6625 and 6660 initial objectives.
