The cotton market melted Tuesday as traders saw no evidence that China bought any U.S. commodities over the holiday weekend. We are guessing the market was not looking for massive buys this past weekend, but certainly something to give meaning to the phase one trade deal. Unfortunately, disappointment lead to a near 3% decline in the ICE Futures
Another negative was the “overbought condition” of the market. From its non-traditional August harvest low, the cotton has come up 25%, followed by a rise from its December low, with no serious correction. Thus, the market was primed for a technical set-back, which it is presently enduring.
A third bearish factor was emergence of the Corona-virus in China. The severe flu-like sickness is allegedly contagious. A global contagion, like SARS in the 2000s, could disrupt travel and commerce. Unfortunately, just Tuesday, the CDC in Atlanta confirmed a single case in Seattle, Washington. That announcement turned the Dow Jones down nearly 200 points.
Going forward, the cotton market is understandably nervous, but isn’t that always the case? The next opportunity for a cotton-specific fundamental comes this Friday when USDA issues its holiday-delayed exports-sales. Last week’s sales were 249,000 plus bales.
For Tuesday, March cotton settled at 69.24 cents, down 2.04 cents, July finished at 71.27 cents, down 1.79 cents and December closed at 70.90 cents, down 1.47 cents. Tuesday’s estimated volume was a stunning 52,564 contracts.