On 3/18 (FOMC day), we saw a wave of reflation across the commodity, index, bond space. Cotton delivered a Buy Alert on that day, offsetting previous Short trade at the .6387 level for a $1400/contract profit. Cotton has been a great performer over the past 12 months and historically. You can find more data on the CT market on the ‘Backtest’ page. I’m now long CT K5 at .6107 with a stop at .57. Cotton remains in a Weekly momentum uptrend, which is a secondary, discretionary overlay I use to position size; I am generally more aggressive when the system lines up with the Weekly MACD differential, which is currently +ve and trending higher (and the buy signal) — this generates a higher probability win rate over an 8 year sample. Cotton has spent some time down in the Sub .60c level and looks to be building support. The Quaterly/Monthly resistance is lining up just below .66c level and this will be tough to beat. And given the weak chart, I’ve been taking all sell signals aggressively short, because its a low risk trade, as the chart sets up. The flip side, as I’ve mentioned, is that cotton is looking increasingly supportive down here. Thats not to say the market is going to runaway > .66c. We are likely to see some decent sideways action develop in 15′. And this will be supportive to the program trades as we have a respectable .10c range to trade within (.66 – .57). It could get choppy if that range starts to tighten up. In other words, I’m a seller of CT at .66 with the system short signals and a buyer and a buyer of CT at .60 level for now. Putting on trades too far away from these levels will increase risk. In sideways markets we need optimal trade location until the market proves us wrong and breaks away.
Futures Trading 