Market Comments – May 16, 2019

The US/China trade scare combined with a bearish technical picture has collapsed the futures market under the weight of heavy spec and index fund selling. However, this drop into the mid-60s has sparked sizeable export business as mills are filling in remaining needs and even bolster their inventories in some cases.

Market Comments – April 25, 2019

The May notice period has established that current crop futures have plenty of support at 7600. For now the market seems to be stuck a sideways flag, but the risk of a breakout is clearly to the upside in our opinion. US prices are still attractive to overseas buyers and the more we keep adding to the sales tally, the greater the likelihood of July getting squeezed.

Market Comments – April 18, 2019

We feel that the market is fairly priced at the current level and that May is probably not far from its “cash equivalent value” at around 7600. Therefore, if takers were to emerge who simply look at the certified stock as a recap to put against export sales, then there is no need for the market to go much lower nor do we need to see full carry.  

Market Comments – March 28, 2019

After rallying to the 78 cents level earlier this week, the market ran into a wall of trade selling and was forced to pull back to the breakout zone near 7600 (former downtrend line which is now support and 100-day moving average at 76.22). We often see markets test support or resistance before resuming a trend and we shall therefore give the market the benefit of doubt. 

Market Comments – March 21, 2019

Today’s move above key resistance has set the stage for a spec short-covering rally, especially if the breakout is confirmed on the weekly chart tomorrow. A lot of these spec short positions are under water now and since algorithms play an important role in specs’ decision making, we expect the market to shoot higher over the coming sessions, possibly into the low 80s.

Market Comments – March 14, 2019

What looked like light spec short-covering pushed the market towards a crucial resistance area on Wednesday, where a 9-month downtrend line, the January high and the 100-day moving average are all clustered together just above 7600. Although the market seems to have failed in its latest attempt, even a sideways move will eventually catch some of these resistance points and this would likely trigger a wave of spec buying.

Market Comments – February 28, 2019

We still feel that the trade will eventually have to boost its 5.4 million net short in order to manage risk on the net on-call position as well as physical longs in current crop and soon to be planted new crop. By comparison, a year ago the trade was still 15.05 million bales net short at this juncture and two years ago it amounted to 19.59 million bales.

Market Comments – January 24, 2019

The longer US cotton remains attractively priced, the more cotton will get pushed into export channels, which will eventually tighten the balance sheet to a point at which price rationing starts to occur. We are not quite there yet, but another month or two of strong sales would probably do the trick. Once export sales reports resume, there could be an ‘awe effect’ that might lead to a positive market reaction.

Market Comments – January 17, 2019

While we feel that the market has solid support at 72-73 cents, we are not quite sure what to make of its upside potential. While today’s break above 74 cents bodes well for a technical rally towards the 7650-7750 resistance area, we doubt that such an advance would be sustainable yet. The US needs to get rid of more low grades over the next couple of months before higher cash prices are warranted, especially in the face of what could be a 20+ million US crop in the making next season.

Market Comments – January 10, 2019

The market actually makes some sense to us at the moment. At 71-72 cents the futures market gets competition from the cash market and therefore doesn’t need to go any lower. However, when it rises to 73-74 cents, like it has been doing a few times since Christmas, the board becomes the top buyer again and therefore attracts selling by the trade.