Today’s break is all about liquidity

Published on: 09:30AM Sep 17, 2008


Many of the trading funds are still heavily involved in the energy markets which continue to implode. This is forcing all long players to liquidate positions because of margins. The other factor that has weighed heavily on trader’s minds today is: How strong is demand going to be in the future if the credit liquidity dries up? If the credit crisis expands and a loss of confidence is seen in demand prospects, the pressure on commodities will be lower even with the reduction in the crop size. 

Bottom line, everyone is heading for the sidelines and waiting for a base to develop before they want to be long again.

Corn and bean farmers some time forget that other crops are planted and some are in even worse situation. I would like to bring your attention to the December 2008 cotton charts. It has been in a downward trend since the February highs and today’s break could be considered an exhaustion of the longs as they move to the sidelines under pressure of losses and margin calls. I have to note we are essentially at the life of contract lows and well below marketing loan. The December 2009 cotton was down over 300 points which moves prices well below the cost of putting out the crops. Either input costs are going to have to take a drastic drop in prices or the acres are not going to get planted to cotton.

I would suggest all speculators to put cotton on their watch list of positions to accumulate. Since you are bottom picking I would be conservative in the number and amount of risk you accept per position.

If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at [email protected] or [email protected].