In other commodity news, the nation's hog herd is at an all-time high, and personal consumption has increased 7% to 49.7 #/per. Southerners eat more pork than the rest of the country, consuming roughly 60 #/per, while the rest of the country is around 43 #/per. Perhaps the folks at Cotton Inc. should study how the pork lobby works. Bacon + cotton.
Chart today shows the Brazil real overlaid with cotton and soy. This may be the most commodity sensitive currency on the Board, followed by the Aussie and Canadian dollar. Just this week, we have noticed that the A$ has moved down to a long term target and support area, via two trendlines that converge around 7215. This weeks low is 7239, and the A$ has recovered a bit from this area. The C$ has equaled a major low made at 7650 area back in Mar 2009, which came at the same time major lows occurred for the SP and the euro. The C$ has made a nice textbook bottom this week and has reversed on the day chart. There is no confirmation that the CRB, gold, crude, copper, silver, soy, corn, et al, have bottomed, but we are hyper-sensitive to anything and everything that could signal that the winds are changing.
Varner View
Cotton got a burst of energy at the lower edge of the trendline we have been mentioning, and you can bet that perhaps there are dozens of two-bit techies out there who draw and see the same line. We all have the same toys nowadays. Cotton has been in a price channel of only 5c since Nov, and a broader 11c band for a year. The catalyst to break out above is a weather issue or a real bottom in the CRB. Weather could make a play next week if Texas remains dry. The CRB rebirth requires a macro shift in all of the markets and will be a lot tougher to conclude than a weather issue. For now, if you bought cotton as recommended below 6400, be short term in holding.
Technicals
The support trendline held and Dec has resistance at the 55 and 89 day averages at 6520. There is a minor trend line across recent highs that coincides with these averages. A seasonal low was due on average date 7/28, and our guess is that this is in place. Seasonal trend for next month is mixed. The price channel has been tested 4x on the low side and 4x on the high side, holding every instance. Mid channel is 6625 and upper is 6850. Specs can toss shorts at 6625, and farmers can try hedges at 6850.