Friday finished on a positive note, but it still closed lower for the week. ThursdayΆs weekly USDA Export Sales data was supportive for cotton, since the old crop sales result was relatively large. That is, the 2012/13 total, at 237,700 bales topped comparable week-ago and four-week average levels by 13% and 46%, respectively. On the other hand, the 336,000-bale shipments figure was somewhat disappointing, since it fell 15% short of the previous weekly result.

But itΆs still the fourth straight weekly loss for cotton futures and itΆs mostly long liquidation, not new selling. Open interest has dropped 10 straight sessions. ItΆs not that traders are ignoring the tardy planting progress and continued dry conditions in west Texas. ItΆs more on the global demand side, with somber news from China early in the week and then today some dissappointing news for domestic demand as well, with GDP for 1st quarter coming in up 2.5%, below the 3.0% increase most were expecting.

At this point, IΆm thinking this market will continue down just a bit more until it marks a 62% retracement of the 1100 point move higher since January. ThatΆs a Fibonacci number that works out to downside risk to 82.20. In fact, it MUST halt this decline. Because the only Fibonacci number left after 62% is a 100% retracement of the entire move, back to the starting point at 7800.

In fact, the inability of cotton futures to build upon their early gains and relatively weak close had to raise the eyebrows of pragmatic traders. That is, while circumstances seem quite supportive and the market appeared due for a technical bounce from the large losses suffered Tuesday and Wednesday, the subdued ICE performance was not what bulls were looking for. If traders do not see something more impressive during the days just ahead, they may decide that the path of least resistance lies to the downside.