Last week’s open (last trading day of 2012) was 74.71 and the first weekly close of 2013 was at 75.05 in the March 2013 cotton contract. Friday’s price action had a low of 73.72 and climbed up from there to close at 75.05. Will the spring up continue into this week?
On the daily chart you see ADX dropping to 29.4 as the previous strong uptrend weakens. DI Differential is very close to zero, telling me to watch closely. MACD is bearish adding divergence from below the signal line and Stochastics are mid-range and dropping.
Proceed to Page 2 for the latest COT Data...
My biggest reason for preparing for a very solid move up is how big money is posturing in the Disaggregated COT report. Producers have been adding to net shorts for a time now at -96,090 contracts, as Managed Money has been adding to net longs now at 30,379 contacts. Our friends the Swap Dealers are net long 52,416 contracts. The last time Producers had such a large net short position was back in August 2011 when cotton started the ride up to over 220.
If you need help understanding how to understand how to use the NEW COT report to your benefit get instant access to my new e-book "What Lies Beneath ALL Trends". It is filled with eye opening information.Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.
Proceed to Page 3 for this week's detailed fundementals...
Over the past few months worldwide supplies of cotton have been high as we have seen a drop in demand. Ending stocks for 2012 look to be 79.6 million bales with 47% of this stored in China at 37.6 million bales. For 2013 demand is expected to rise and we could see production drop. All signs for higher prices. And let’s not forget “big money.” This week’s release of the USDA’s WASDE report will shed some light on cotton to be released on Jan. 11. China and India are the largest worldwide cotton producers.
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