The cotton market is consolidating nicely into a technical flag pattern. We have a USDA report coming out on Wednesday so this is understandable since the market is looking for guidance at these lofty levels. Equities are also running into resistance as the USD holds steady. Volume has been coming down on a daily basis while most of the activity is seen in the growing cert stocks.

The spec long position has increased to 15.1% and total open interest is near 185k. We have had a very impressive run in cotton as other commodities have also been firm in energy, grains and metals. The end of the first quarter is coming quickly and we are entering a seasonally bearish period for the commodity and equity markets. Under the current economic conditions and potential for FED tightening, the upside feels limited.