DTN Cotton Open: Lower on Phase One Uncertainty

Cotton modules lined up in a gin yard. ©Debra L Ferguson

Having a long weekend to mull the Phase One Agreement, the cotton market is taking a bearish tone Tuesday morning. One major reason is the lack of specifics regarding future Chinese purchases. Additionally, the market has attained an overbought technical status after having rallied nearly 1500 vertical points since its August low.

To that point, certain speculators have flipped from a net short to a net long position. Still other positive news is needed. The next opportunity for that to occur will be this Friday when USDA will issue its delayed export sales data.

The emergence of China’s mysterious Corona-virus is capturing the attention of globe investors. It is being likened to the SARS epidemic of the 2000’s. The negative to the world is a viral contagion could curtail travel, slow commerce, and adversely affect the health of populations. Overnight, the Asian stock markets were lower, and that negativity has spread over the Europe and into the United States.

Technically, the cotton market is consolidating under its January 13 lows, while money-managed speculators have increased their long position. Friday’s commitment-of -traders report indicated those traders were net buyers of 9,350 contracts for the week ending January 14th.

Their action swelled long holdings to 30,285 contracts. It is worth noting in January 2018, speculators held a net long position on the order of 100,000 plus contracts. Either they are just getting started in building a beefy long position, or merely “experimenting” with one.

For Tuesday, support for March cotton lies at 69.70 cents and 69.05 cents, with resistance at 71.40 cents and 72.00 cents. Overnight estimated volume stands at 8,800 contracts.

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