In a reversal after three days of lower closings, the cotton market is demonstratively higher Friday morning. No one should really be surprised, given that the market witnessed the signing of the partial Phase One deal with China, the passage of the USMCA trade agreement by the U.S. Senate, a record Dow Jones, plus strong export sales. Apparently, with such bullish news as a backdrop, the market did not want to become overly bearish.
This weekend will mark the observance of the MLK Holiday, thus the ICE cotton market will be closed Monday, resuming trading Monday night. Of course, that closure means next week’s export sales will be pushed back to Friday.
Open interest continues to rise, indicating the speculators are adding to their net long position. Subscribers will recall how speculators were net short, even record net short at times, for nearly all of 2019.
However during the harvest of 2019, as the spot cotton began to rise, speculators started to initiate short-covering action. Yet, when the market closed over the 200-day moving average, speculators saw that as a clarion call to actively reverse their bearish positions, and buy net long.
Thursday’s strong export sales continue to under-gird prices. To that end, cumulative sales have reached 11.585 million bales sold, which is the strongest pace since 2010/2011. Interestingly, that season saw the cotton market trade historic highs. To date, current season sales have reached 77% of USDA’s original forecast. This number compares to the 5-year average of 72%.
For Friday, support for March cotton is 69.70 cents and 69.08 cents, with resistance at 72.00 cents and 72.50 cents. Overnight estimated volume is 13,868 contracts.