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Overbought Cotton Market Conditions


The shutdown of travel out of the UK and news of another strain of Covid are enough to keep the demand tone very bearish and the market in a long liquidation selling mode. Demand concerns continue to weigh on the cocoa market as they have kept the supply pipeline full going into year-end. Concern over global demand continues to be a front and center issue for the cocoa market as several European nations have reinstituted new COVID shutdown measures.


The market is trading sharply lower this morning as outside market forces turned negative. Next year should bring improved global demand and a sizable decline in Brazilian production, both of which will help coffee to extend its November/December uptrend.


With the overbought condition of the market and the new virus news overnight, cotton looks vulnerable to a significant downside correction over the near term. While ending stocks, both world and US, have been tightening, they are long way from being called tight.


The collapse in crude oil overnight has helped to spark some long liquidation selling in Sugar. Keep in mind; managed money fund traders net sold 16,816 contracts for the week and are now net long 198,423 contracts. This leaves the market vulnerable to increased selling if support levels are violated.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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