After posting on Tuesday what most chart traders call a key reversal pattern, the market is attempting to, well, reverse. A key reversal is a one-day pattern where a market posts an outstanding low and then reverses to close sharply higher.
Supposedly, such action signals the end of that particular downdraft. However, for the market to believe and then positively act upon it, follow-though buying must emerge. This is the market’s task today. Such may prove difficult as sentiment and most fundamentals remain stacked against the market.
As it looks, the 2019 crop is being planted at a strong pace. The 7-day forecast has rain for west Texas, and the two-week forecast also looks to be above normal precipitation. Therefore, traders may assess the current crop is off to a good start.
In fact, there is growing belief June’s acres report will show greater actual acres than March’s intended acres. Another negative also emerging is the belief China may cancel previous U.S. sales. To date, China has booked some 1.96 million bales of the 2019 crop, and the U.S. has already shipped about 1.1 million bales.
The difference of 830,000 bales may be in jeopardy of cancellation as a political ploy.
Thursday, USDA will issue its weekly sales and exports data. Obviously, a positive report is needed to change the sentiment of the trade and China needs to be a participant in the data.
For Wednesday, support for July cotton is 65.85 cents with 68.60 cents and 69.85 cents is considered resistance. Overnight, estimated volume stands 7,870 contracts.