Today I'm talking with EWI's Futures Junctures Service editor Jeffrey Kennedy as we revisit a bearish call he made on cotton nearly two months ago.
Nico Isaac: Jeffrey, in your May 31 Daily Futures Junctures, you labeled the following chart of cotton with a bold arrow pointing down for the coming months.
First of all, what pieces of evidence did you gather to bolster your bearish call for cotton?
Jeffrey Kennedy: Primarily, I consider the Elliott Wave Principle my canvas. It stands above all other methods of technical analysis by providing a context for price action. I also utilize additional studies, tools, and indicators in order to practice evidence-based analysis.
With respect to cotton, we had a completed five-wave pattern (a major sign of a market reversal), a bearish Japanese Candlestick, and several diverging momentum indicators -- all of which helped solidify my bearish outlook.
NI: Since May, cotton prices did indeed fall in a precipitous decline right into your cited price target range. But on July 26, cotton turned itself around in a pretty sizable one-day rebound. What signs are you looking for to signal whether this move up marks the end of cotton's lengthy decline?
JK: I would be inclined to view the move as the start of a reversal on two conditions: If the rally took place after the culmination of a five-wave or an A-B-C decline. I discuss that in the July 26 Daily Futures Junctures issue.
NI: In the meantime, what other markets have landed on your radar for potential near-term opportunity?
JK: In tonight's Daily Futures Junctures, I explain why I'm very excited about lean hogs.