In This Issue

Learn How to Utilize Options on Crude Oil
Cotton Market Goes Parabolic - Major Top Likely Soon
Economic Calendar

October, 27th 2010 - Issue #555

Learn How to Utilize Options on Crude Oil

Get a current view as well as the complete guide "Buying Options on Futures." Full service brokers can help you implement your current market view or you can do it yourself with a leading online trading platform.

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Cotton Market Goes Parabolic - Major Top Likely Soon

by Jim Wyckoff

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ICE Futures U.S. cotton for December delivery on Tuesday hit an all-time record high of $1.3050 a pound. The past week has seen futures prices blow right past the previous all-time high of $1.1720, scored in 1995. However, commodity market price history suggests cotton futures are now in the final phase of a major bull market run and it's likely a market top will be established sooner rather than later. Cotton futures have been in a parabolic phase (extreme daily price volatility) for the past few weeks. This is one significant technical clue the market is in a final phase of climax that will likely put in a top in the coming weeks, or sooner. Just recently, expanded daily futures trading price limits have been hit on a regular basis. Importantly, the final climax stage of a major bull run in commodity futures markets can see prices appreciate by up to 25% of the entire bull move in a short period of time. So while the cotton futures market may be close to topping out from a time perspective, there could still be much larger price gains produced during a short time span. One other bearish near-term technical clue for the cotton market is that the Directional Movement Index (DMI) overlaid on the daily bar chart for December cotton is showing bearish divergence. The ADX line of the DMI study still shows the cotton market is an extremely powerful price trend. However, the ADX line is presently not reading as high as it was in late September. This is called bearish divergence. It occurs a market reaches a new high price, but a technical indicator does not correspond a new high, itself, and the indicator actually starts to decline as the market price reaches still higher. Stay tuned!

There is a substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products. Past performance is not indicative of future results.

Jim has an excellent daily newsletter where he reviews different markets, alerts you for potential trades and much more. Included is his great bi-weekly newsletter with charts and a little longer term outlook. We recommend checking out his website, educational CDROM, and services at Jim Wyckoff

Economic Calendar

Source: Moore Research Center, Inc.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!