March ICE cotton futures on Tuesday traded down the 300-point trading limit, and then on Wednesday showed solid follow-through selling pressure to produce significant near-term technical damage. The daily bar chart for March cotton futures shows that an uptrend line drawn from the November, December and January lows was penetrated on the downside and negated. Now, a fledgling three-week-old downtrend line can be drawn off the January and February highs. The next downside price objective for the reinvigorated cotton market bears is to push prices below a very strong technical support zone between 41.31 and 39.23 cents. The contract low is 39.23 cents. A drop below this support zone would produce more serious technical damage to then suggest an extended price downtrend.
click on the chart to enlargeThe cotton market bulls can point out that historical charts show that major bear markets have produced major market lows around the 40.00 cent level, basis nearby futures. For the cotton market bulls to begin to regain some fresh upside near-term technical momentum to suggest a market low is in place and that prices can begin to sustain an uptrend, they will have to produce a close above major psychological resistance at 50.00 cents.–Stay tuned! Jim Wyckoff