(CTZ2:NYBOT) has marched steadily lower since late June, making lower highs, lower lows or inside bars for 14 straight weeks. But now the market has reached a juncture at which it will likely encounter significant support and a backlash into its down channel.
Notice in the following weekly chart how the 42.00 area has been pivotal for more than a year. Last October, at point A, cotton fell out of bed and traded to a contract low, leaving a gap that took 11 weeks to fill. For the next four months, the market consolidated -- marked with the letter B -- with the 42.00 area serving as the average price during that time. Again, 42.00 proved pivotal when the market lapped lower at point C, en route to test the contract low. But despite the summer selloff in cotton, the market has made higher highs and higher lows over the past year, indicating that the weekly uptrend is still intact.
The 42.00 area now again comes into play to define this market. If the uptrend since the October 2001 low is to remain intact, the 42.00 area should hold as support.
Key Fibonacci ratios are clustering at that level to lend support, a constructive sign. Cotton also closed Monday just above
symmetrical support, suggesting the market will rebound and recover ground lost during the summer lull.
More Mo for Cocoa
Momentum in the breakaway December
(CCZ2:NYBOT) market has accelerated due to an insurrection over the past three weeks in the Ivory Coast. Rebels there have seized the northern half of the Connecticut-sized country.
Markets hate uncertainty, and the violence and political turmoil in the West African nation that produces more than half of the world's cocoa supply come just as chocolate makers are stocking up for their busiest holiday season. Despite prices that have soared to their highest level in 16 years and an extremely overbought condition, nobody wants to be caught short in this uncertain environment. Also bear in mind that one of the classic definitions of a bull market is one that gets overbought and stays overbought.
Bullish Forces in Oil
(CLX2:NYMEX) has slipped $2 a barrel over the past five trading days, but the upside inertia in oil and the energies remains a bullish force. Two areas stand out as support levels to test the theory that the rally in crude isn't over yet. Between 28.98 and 29.10, we have the 38.2% and 61.8% retracements of previous swing points that tightly coincide.
There is also potential symmetrical support from the late-July pullback into this area. In the event that support in the 29.00 area breaks, the next level with retracement and symmetrical projection support resides at 28.40 to 28.61.
Finally, notice the nice follow-through that came after March 2003
(SBH3:NYBOT) triggered a pullback from a high setup last Wednesday and left the market at a 10-month
The Louisiana Farm Bureau Federation said
Hurricane Lili damaged 10% to 25% of the Louisiana cane crop last week.
Marc Dupee is an independent trader and co-author of the book
The Best: Conversations With Top Traders. Dupee was formerly markets analyst and futures editor for TradingMarkets Financial Group. At time of publication, he was long cocoa, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback to
TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon purchases by customers directed there fromTheStreet.com.