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NY cotton futures ended higher on Friday as the market staged a halting recovery from a sell-off caused by a credit squeeze, which hit commodity markets as a whole. It was still premature to judge the impact of the financial gyrations on the world economy and cotton demand in specific. The market paid little heed to the weekly export sales report from the US Agriculture Department, which said total US cotton sales reached a higher-than-expected 395,200 (500-lb) running bal es. The market also paid little attention to the landfall of Tropical Storm Erin in southern Texas, which brought flooding downpours in the growing areas. The active contract rose fell lower in line with our expectations. As mentioned in the previous update, there was a good possibility of filling the gap in the 58c zone. Though there are no clear signals of reversals, a potential rise to 61-61.50 cents looks likely in the coming week. Resistance will now be seen in the 63-65 cents range. And as long as 66.50/70 cents caps upside attempts, we can expect cotton futures to correct lower. As we have been maintaining, a re-test of 70 cents seen in 2004 is on the cards. The bigger picture looks bullish and is set to scale new peaks after prices broke above the 60 cents range convincingly. RSI is in the highly oversold zone indicating an upward correction in the offing. The averages, in MACD have gone below the zero line indicating a bearishness. Only a cross-over of the averages above the zero line again will now indicate a bullishness. Prices are below the short-term 8-day period and 21-day period EMA at 62.55 and 60.47 cents respectively indicating short-term bearishness. Therefore, look for cotton futures to bounce higher. Supports are at 56.85, 56.20 and 53.78 cents. Resistances are at 58.40, 59.75 and 61.50 cents respectively.

Gnanasekar T.

(The author is the Director of Commtrendz Research and also in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. This analysis is based on the historical p rice movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)

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