RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Softs

Favorable R/R Sale in Cotton

Posted 08/20/2019 10:37AM CT | RJO Market Insights

While the market has yet to fail below 12-Aug’s 57.55 low and our short-term risk parameter needed to confirm this month’s recovery attempt as a 3-wave and thus corrective event consistent with our still-arguable long-term bearish count, the market slipped enough yesterday to identify yesterday’s 60.25 high as one of developing importance and prospect end or upper boundary to a correction up from 05-Aug’s 57.26 low.  In this regard we’re considering 60.25 a micro risk parameter from which a bearish punt from at-the-market (59.40 OB) can be objectively based and managed.  If correct, this count would call for a resumption of the major downtrend to new lows below 57.26, making this a favorable risk/reward bet.

Cotton Dec ’19 240 Min Chart
Cotton Dec ’19 Daily Chart

The dominance of the 14-month downtrend is clear in the weekly log chart below.  Market sentiment levels are understandably at historically bearish levels that ultimately will warn of and accompany a major BASE/reversal environment.  But traders are reminded that sentiment/contrary opinion is not an applicable technical tool in the absence of a confirmed bullish divergence in momentum of a scale sufficient to break the major downtrend.  Herein lies the importance of 25-Jul’s 64.68 next larger-degree corrective high and key long-term risk parameter.

These issues considered, a bearish policy remains advised for long-term players with a recovery above 64.68 required to negate this call and warrant its cover.  Shorter-term traders with tighter risk profiles whipsawed out of bearish exposure following 08-Aug’s bullish divergence in short-term mo are advised to re-establish bearish exposure at-the-market (59.40 OB) with a recovery above 60.25 required to negate this specific all and warrant its cover.  In lieu of such 60.25+ strength we anticipate a resumption of the major bear to new lows below 57.26.

Cotton Dec ’19 Weekly Chart

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.
Read More