Am I a Rally Killer?

Uh, I hate to mention this because I'm usually the King of Jinx, but there is a rally going on for the December '08 contract on the New York Cotton Exchange.

Today (December 27), the contract opened above a major up-trend line and that's good news. See the chart below.

What I see is that the contract developed a very visible and very bearish head-and-shoulders formation back in mid-October. Despite putting in a life-of-contract high of 76.40 during that time span, the market ran out of steam and tumbled back to around 70.50. Essentially what happens during the development of a head-and-shoulders formation is that the market makes three runs at moving significantly higher, but can't sustain the rally. December fell back to less that 71 cents, but has now regained about 450 points of that.

In my mind, there are two major reasons for the rally. One is that stocks continue to drop, and that's a drum I will continue to beat. And two, we are in for a further reduction in acreage. What acreage will be is a shot in the dark that I am not willing to take at the moment. History says I'll only shot myself in the foot no matter what.

The first call for 2008 will be The Cotton Grower Annual Acreage Survey in the January issue, which will be available at Beltwide. I'm not going to spoil the fun, or lack thereof.