After its devastating decline on Tuesday, the overnight market is attempting to trade positive. Hedgers and speculators alike, in staying true to the trend, are somewhat bargain hunting their needs. Thus far, volume is a not-too-shabby 12,600 contracts traded.
Despite Tuesday’s massive slide, holding a chart out at arm’s length still promotes the notion the cotton market remains in an upward trend. Given certain managed-money speculators flipped during late harvest from net short to net long, accordingly that group is apt to defend its new positions with buying.
In fact, Open Interest hardly budged lower Tuesday. As for textile hedgers, they already know current year sales are outpacing USDA’s original target, and likely will cover more of their needs on this decline. Additionally, with the 2020 crop still unseeded, who is to say how the 2020/2021 crop will fare?
Lastly, with Phase One and USMCA now approved, along with a weakening U.S. dollar, the backdrop for substantial price support is now being constructed.
As a reminder, Thursday’s normal export sales data has been pushed back to Friday due to the MLK holiday. Over the past 8 to 9 weeks, U.S. sales have held in about 250,000 bales per week. The exceptions were the weeks after Christmas and New Year’s. Some traders expect little business from China during the Lunar New Year celebration, which runs from January 25 through January 30.
However, traders have asked what business is China doing anyway? Yes, they have been a buyer during this marketing year, but other countries have actually supplanted China as the U.S.’s top customer. If USDA reports sales amounts toward the 250,000-bale mark, the market might end this week on a more positive tone.
For Wednesday support for March cotton is 68.50 cents and 67.80 cents, with resistance at 70.20 cents and 71.25 cents. Overnight estimated volume now stands at 13,320 contracts.