Cotton (Update)

About a week back I wrote:  "there is some potential support in this 130-150 area.  We touched the top end of this range today.  Let's see if we get a bounce from somewhere in this area in the next few days.  You saw the first real signs of buying in 3 weeks with the lower shadow on today's candle.  I expect some lower prices before we get a significant bounce."  Since then we saw a brief rally followed by lower lows, another brief rally followed by lower lows.  The market made 3 new lows as momentum slowed down: the RSI showed bullish divergence and the MACD got a bullish crossover a few days back.  All this took place in the 130-150 zone (low was 142.06).  The market closed today at 159.86 for a nice 10+ point rally.  Let's see if it goes and tests 175-180 zone, which was previous support.

CCI (weekly chart)

The double top formation on the weekly chart was confirmed Friday with a close below 653.07.  The downside objective is ~ 580.87 with stops around 670.00.  The two peaks were formed with a bearish divergence in the RSI: new highs with slowing momentum.  You also had a bearish MACD crossover weeks ago.  These were the first warning signs of a possible correction.  I would expect a bounce in the next week considering how quickly we sold off.  I don't expect the recent highs to be taken out anytime soon.  I think we reach the downside double top ojective of 670.00.

CCI update

We have seen significant selling the past two days since confirmation of the H&S Top.  The objective of 658.07 was reached early today and continued much lower.  The weekly chart shows a potential double top formation as well.  If we get a close below 635.07 tomorrow it will be confirmed.  This would signal even more downside action with the potential objective around 580.87.  Commodities have been overbought for quite some time now and the technicals were pointing to a possible correction at these levels.  If you weren't able to get short any commodity markets you should have at least been liquidating any long positions.

Continuous Commodity Index

Commodities have been on an absolute tear since Dec 2008 with a return of around 89% on the CCI over that span.  However, this market may finally see a correction.  The market just recently tested the March 7th high and has sold off since.  It took 7 days from the March swing high down to the March swing low and took 25 more days to get back and make a new swing high.  This negative skew is a bearish sign and shows stronger downside momentum.  Over the past couple weeks we formed a H&S Top formation on the daily chart at a previous resistance point.  We got confirmation today with close below the neckline.  The downside objective is ~ 658.07 with stops @ 687.74.  The weekly chart also shows some bearish signs with a negative divergence on the RSI.  If this pattern holds to form, then you should see a big correction in most off the commodity markets including the metals. 

Cotton

July Cotton reached its H&S Top objective today ~ 149.03.  It reached this area pretty quickly: over 39 points in just 12 trading days.  The reward to risk ratio was a solid one: 2.63 to 1.00.  It takes deep pockets to trade this market, but if you have the capital it would've meant risking ~ 7475 to make ~ 19660 on a one lot.  Not bad for less than 3 weeks work.  Yesterday I stated there is some potential support in this 130-150 area.  We touched the top end of this range today.  Let's see if we get a bounce from somewhere in this area in the next few days.  You saw the first real signs of buying in 3 weeks with the lower shadow on today's candle.  I expect some lower prices before we get a significant bounce.

Cotton (update)

It's time to revisit the July Cotton H&S pattern that was confirmed back on 4/12.  This market has sold off very hard since then and closed limit down today at 153.39.  The objective for this pattern is 149.03, which is in the crosshairs.  There is a possible support zone in the 129.70-150.35 area.  I expect this market to test this area and get an oversold bounce.  Fib support calls for a test to 140.00 or so with strong support around the 131.75 area.  Let's see if we meet our objective and if a bounce occurs in this area.

Crude (July)

Crude has rolled over, but wanted to update the July action one last time.  The market did sell off in the resistance zone and found support at the second of three support levels.  I expect a run to test the recent highs.