December cotton started the week higher, continuing the trend to the upside and closing at 89.16. The market traded up to 89.76, its highest level since June 15th. Crop condition rating came out better than expected with an increase in the good/excellent rating as well as a decrease in poor/very poor ratings. Although this looks to add pressure to the market, current good/excellent ratings are down from both last year and the 10-year average at this same time. Both the 5 and 14-day forecast for the key growing region of west Texas shows increasing temperatures and little to no rain. While improved crop conditions might initially pressure the market, an outlook of unfavorable weather provides support for trade higher to continue. Momentum studies are improving and approaching overbought levels. Resistance comes in at 90.85 and 93.65 with support at 88.25. A close under 86.60 would reverse the trend back to the downside. Look for the market to continue to push higher as weather outlook remains unfavorable.
Cotton Dec ’18 Daily Chart