The cotton market is lower as it struggles to keep a tiny bullish perspective. That is, after bottoming on August 5, the December contract has produced a small recovery rally. With speculators dominating the trade, prices were pushed lower Sunday night, but have fought their way back to nearly unchanged levels.
Of course, at the forefront of the market’s volatility is the U.S.-China trade war. Recently President Trump linked a final trade deal to China’s handling of the crisis in Hong Kong. Protesters were out in full force for the eleventh time this past weekend.
Moreover, when we say full force, it is estimated one million people hit the streets. China’s fear is these events will evolve into a democracy movement, and is massing troops along the border. The U.S. and China have scheduled new trade talks in September.
Monday afternoon, at 4pm eastern, USDA will issued its latest crop condition reports. For the past several days, Texas has suffered unduly high temperatures and zero rain. The 6-10 day forecast calls for more of the same: above normal temperatures and below normal rainfall.
Speculators remains massively net-short the market. In recent weeks, the commitment-of-traders data showed speculators were short some 49,000 plus contracts, or about 4.9 million bales of cotton. With the bearish trend at their back, it will take a new and dramatic piece of bullish news to alter their bearish attitudes, and dislodge them from their short positions.
For today, support for December cotton stands at 58.90 cents and 57.55 cents, with resistance at 61.00 cents and 61.80 cents. The overnight estimated trading volume is 2,245 contracts.