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Further Losses Reaffirm Bearish Cotton Count, Define New S-T Risk

Posted 09/28/2018 10:23AM CT | RJO Market Insights

Today’s break below 19-Sep’s 77.90 low reaffirms our major bearish count resurrected in 13-Aug’s Technical Blog and leaves Wed’s 79.60 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to even defer the bear, let alone threaten it.  Per such this 79.60 high now serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a still-advised bearish policy and exposure.

Cotton Dec '18 240 Minute Chart

 

Cotton Dec '18 Daily Chart

On a broader scale and while the market has reached the (76.91) 1.000 progression of Jun-Jul’s initial 94.82 – 81.75 decline from 01-Aug’s 89.98 corrective high, the trend remains down on all scales and should not surprise by its continuance or acceleration.  The former 77.90-area AND the former 80.60-to-81.20-range, since broken, now serve as outstanding new resistance candidates with 29-Aug’s 84.25 next larger-degree corrective low remaining intact as our key long-term risk parameter to a bearish policy.

Shockingly and despite nearly FOUR MONTHS of peak/reversal behavior behind the market, our RJO Bullish Sentiment Index shows that the Managed Money community remains stubbornly skewed to the bull side.  We first noted this factor and warning of downside vulnerability more than three months ago in 18-Jun’s Technical Blog following that day’s bearish divergence in momentum that rendered sentiment/contrary opinion an applicable technical tool.  At a still frothy 88% bullish level (we suspect today’s CFTC update will show a little more erosion as the market forces the capitulation of this long-&-wrong policy), this indicator warns of further downside vulnerability and possibly accelerated losses from even currently depressed and perceived “oversold” levels.

In sum, a full and aggressive bearish policy and exposure remain advised with a recovery above 79.60 for shorter-term traders to take defensive action.  Commensurately larger-degree strength above at least 82.00 and preferably 84.25 remains required for longer-term players to pare of neutralize bearish exposure.  In lieu of such strength further and possibly accelerated losses remain expected with the 73-handle-area resistance from 2016-17 a possible support candidate.

Cotton Dec '18 Weekly Chart

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