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Tech Guy Weekend Comments for 10/22/22

During the time period from about August 17th - August 26th I mistakenly thought Dec Cotton had marked a measuring/midpoint gap to the upside above the price of 115. It turned out to be an exhaustion gap and price has plummeted to below 80.


Roger asked me to take a fresh look at Cotton a couple days ago - his timing appears to be very fortunate. The weekly cotton chart is completing a large pattern which has most likely exhausted itself to the downside.


I do not receive cotton market data so the charts are static from a different vendor (from my usual charts) with no markings, but I believe you will be able to see what I describe.

Let me explain: The selloff in Dec Cotton from August at 125 to this week at a price just below 76 has a gap right in the middle of the run at the price of 100. 100 is directly halfway between 125 and 75 -This gap is a midpoint gap.


Traders and technical chart analysts who were watching Dec Cotton on Sep 19th when it gapped down to 97.54 could have predicted that the price would likely terminate near the price of 75 because 125 minus 100 (about the middle of the gap) equals 25. 100 minus 25 equals 75.


There is more evidence that the area between 70-80 in cotton is good support on the monthly chart going back 25 years. Also the 2 legged A-B-C correction down has the DNA of being complete. Additionally, the 45 minute intraday chart's price action shows a market that likely put in a good bottom on Friday. Here is the weekly chart showing the midpoint gap:



Dec Cotton closed limit down on Wed Oct 19th. On Thursday it continued to sell down to 77.37 then on Friday it continued selling more - down to 75.80. After this the fund buyers came in guns blazing to shoot price quickly back up to the price 79.93. 79.93 is higher than the previous day's swing high at 79.66. This action of selling off then abruptly buying straight up has the hallmarks of capitulation/selling exhaustion with a lot of new panic-like buying coming in to the market - I am confident you will see what I am talking about - here is the Dec Cotton 45 min chart:


The price action of Dec Cotton shooting straight up to eclipse the previous day's high is like a key reversal up (I don't know if it is by technical definition). My best estimate is the weekly cotton price (Dec contract now) will buy up to 125-135 (maybe even trading up to the old high of 158) in the coming weeks or 3-4 months - based on the weekly chart projection.


Dec Soybean Meal closed strong on Friday - up +4.40 to 417.7. This strength will help the Nov Soybeans buy up as well - remember I expect the weekly soybean chart to have an expanded week or 2 up after marking 3 small range weeks. The next resistance in Dec Meal is the high at 443.80


Dec Corn and Wheat should also mark up in price this coming week. Dec. Corn is in that tight trading range below 700 and Dec Wheat is marking a bottom between 855-832. The S&P marked a huge up day on Friday, as well (up +96.75) - continuing it's new impulse leg up. More chart details later.