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For The Moms: Gold And Cotton

ByMatthew Bradbard
Published 05/07/2014, 03:29 PM
Updated 07/09/2023, 06:31 AM
The women I know love clothes and gold and I think both -- at least at the wholesale level -- will be going on sale in the very near future. US Cotton No.2 prices have been dancing the up-sloping trend line for the past 6 months as seen on the chart below. Current prices have July futures higher by 19% off their December lows. As of this post futures are lower by 1.38% in today's session and challenging the up-sloping white trend line. I am thinking we break the trend line in the coming sessions and at a minimum we see a retracement to the 38.2% Fibonacci level near 88 cents.

For now, bulls remain in the driver's seat but momentum appears to be turning. Export sales are rumored to be light this week so I think some longs are booking profits ahead of Thursday's number and also we have a USDA report on Friday. Open interest remains high -- the highest since Nov. 13 -- which leads me to believe that if and when we turn and if the longs puke, it COULD accentuate the move lower.

Cotton Futures
June gold futures failed just shy of the 50 day MA (light blue line) this week and as of this post prices are off by 1.44% today breaking the 200 day MA (red line). In weeks past buying has supported on trade below $1275 but could this time be different? Being I do expect the US dollar to track higher from current trade and there seems to be no concern about inflation at least in the short run I think the path of least resistance will be lower. I anticipate that once $1270 is breached futures make a run at their lows from late 2013 near $1200/ounce.

The fact that the recent South African supply side threats did not spill over and result in any upside spike should be disconcerting for the the gold bulls in my opinion. Violence in the Ukraine which should also be supportive and has not resulted in any bullish action. When what should be a bullish impact and markets do not respond as a trader I think you should take the other side of the trade...this has been my experience.

Gold Futures
The sale may not happen in time for Mother's Day but I do think that we see lower wholesale prices in both cotton and gold in the coming weeks.
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