After the recent USDA report showed a slight decrease in domestic ending stocks (Aug 5.60 vs. Sep 5.20), cotton (NYBOT:CTZ14) prices caught a quick bounce up to the 68.50 level before pulling back.
The broader market didn’t seem concerned that the report showed over a million-bale increase in world ending stocks; however, the large world supply may be beginning to weigh on prices as cotton has recently begun to retreat from the 68.00 area. Technically, the near term momentum does appear to be positive; yet the broader intermediate term directional bias is a bit less clear. The markets inability to trade above previous structure around 68.50 casts a shaddow of doubt over the recent strength in the cotton market and the recent strength in prices will remain suspect until the market can trade (and hold) above the 68.54 level on the chart.
There are a few key techncial levels of support below the market here at 65.08, 64.53 and 63.75 which will certainly give more clarity to the underlying strength of this market. If price action fails below 63.75, then the market will likely continue lower and resume the longer term bearish trend.