The cotton market was up overnight as traders sense the seasonal low of October 1 will hold. In fact, the March contract is holding its higher gap opening of Sunday night, and that action alone is encouraging buyers to enter on the long side.
Open interest has fallen to a one-year low, so there is plenty of room and time for a new upward trend to develop. Another widely-watched technical indicator, the moving averages, are likewise looking upward as well.
Of course, the fundamental reason for the strength stems from the U.S.-China 90-day moratorium on tariffs. During this time, China agreed to buy substantial amounts of U.S. agricultural products.
Now the markets want to see evidence of that condition in black-and-white via USDA’s weekly sales and exports report, delayed until Friday this week as the government is closed for the memorial of President George H.W. Bush. Such evidence will likely not be seen until January as the physical logistics need to be worked out.
After all, China has been a net cancel of previously purchased bales for many consecutive weeks. The Labor Department will issue its monthly jobs data on Friday as well. Each one is important, but Friday’s will be especially so given the recent collapse of the Dow.
A strong jobs number would help the psyche of the financial and commodities complexes. Expectations are calling for 200,000 lobs created during November versus the last number of 250,000 jobs.
Thursday is the last trading day for December 2018 cotton. From its low of 61.09 cents in February 2016 to its huge high of 94.85 cents in June of this year, it has taken us all on quite a wild ride.
For today, close-in support for March cotton is 79.60 cents and 79.00 cents, while resistance is at 82.00 cents and 83.85 cents.