The cotton market is sharply lower Monday morning in conjunction with major global selling over the coronavirus. With its worsening impact changing hourly, traders and investors are liquidating a portion of their financial and commodities holdings.
The Dow Jones is down more than 400 points, crude oil is off nearly two dollars, and spot March cotton is testing obvious chart support of 68.80 cents. In an unfolding situation of blind panic, traders seem to be selling now and ask questions later.
Some positive fundamentals do remain to eventually bolster cotton prices: cotton’s strong export pace, the signed phase-one deal, and new-crop December has eased back under the cost of production. Yet for now, it would seem all of those positive affirmations have been shoved to the sidelines.
Our understanding is that several of the Chinese stock markets are closed this week for the Lunar New Year’s celebration. Originally, they were scheduled to open this Friday, which, depending on how well Beijing finesses this virus situation, could set off another round of intense selling.
This Thursday USDA will issue another weekly export sales report. Last week’s data had sales at nearly 310,000 bales, exceeding its ten-week average pace of 250,000 bales sold. At this point, it is impossible to say whether cotton’s price drop from the coronavirus will discourage textile buyers or will encourage new purchasers as they look beyond the virus.
Monday, support for March Cotton lies at 68.00 cents and 67.10 cents, with resistance at 69.30 cents and 69.80. Overnight estimated volume is 14,060 contracts.