Despite the destructive forces of Hurricane Michael, poor demand is keeping prices in check. Thursday morning, USDA reported dismal sales and exports business, whereby the current season’s numbers failed to crack triple-digits.
Additionally, it was at least the third consecutive report where China cancelled previously purchased cotton. True, China is stacking some sales out in the 2019/2020 season, but those are simply hedges, and may be crossed out at any time. To fulfill immediate needs, China is teaming up with India, Australia, and Brazil.
A crucial fundamental for cotton is the upcoming mid-term elections. The theory is if the Republicans maintain control of Congress, the Chinese will be motivated to return to the negotiating table. If the Democrats take back the House, then President Trump will be perceived to have a weaker hand, and the Chinese may carry on with their trade war fight.
Technically, the trend of cotton is demonstratively down. The definition of a bear market is one where a series of lower lows and lower highs has obviously developed. To break that bearish string, December cotton would need to close over 7960, as that price was the last noted lower high.
December cotton support should to be found at 7725 and 7680, while resistance is about 7916 and 8060.