The Recession Seems To Be Falling On The Wall.

In the past week, cotton in New York was still depressed. The December contract closed down 190 points at 69.48 cents, and the contract closed down 185 points in March, at 74.54 cents.

The market segment is still very narrow, between 68.54-71.74 cents.

The US Department of Agriculture reported positive results, which prompted a short rally in the market. In addition, there was a rally in the peripheral market following the trend.

For the rest of the time, the market is almost impossible to achieve.

Unlike other commodities, the amount of empty cotton has basically remained unchanged.

The market still seems to think that speculative bull trading is the main factor that leads to a weak market, but the slight change of the situation can be seen simply by looking at the change in the volume of empty stocks.

Since June 24th, the size of speculator positions has changed from the net multi head contract of 41000 futures cotton and options to 1000 headroom contracts, but less than 40% have come from multi positions and more than 60% come from new short positions.

The net position of index funds has not changed. It is still about 104000 net long contracts.

Cotton Traders and textile mills are used to falling markets. They start trading according to their psychological price, use current bullish contracts to lock prices, and accelerate the market to buy about 42000 net cotton and option contracts.

About 85% of net purchases, including existing short positions, are only a small proportion of long positions.

Therefore, in the past 7 weeks, the market has fallen from 80 cents to 60 cents, which is characterized by the turnover of short trade and short speculation, and the role of bulls in the market is relatively small.

The reason for the collapse of the market is that speculators are selling the market in large numbers, the technical curve is broken, the peripheral market is weak, and the trade seems to be quite calm, just buying and locking the market price at a very low price.

But speculators are getting weaker and weaker, and the energy of trade seems to be gathered below 69/70 cents, mainly due to increased psychological behavior, perhaps because of the emergence of new textile mills or existing contract pricing.

The latest report shows that about 5000 contracts were locked down last week, but there are still about 58000 contracts to be locked up. These contracts should provide considerable support for the market.

What we need to keep in mind is that in the foreseeable future, the whole trade will remain a net buying period of cotton and options, because cotton producers must export about 20-30 bales of American cotton each week, and the textile mills still need to lock some of the contracts that need to be locked at the low level.

These behaviors will be pformed into the net buying period of cotton.

At the current low price, there will not be long term signing of new cotton in the US, which means cotton traders are not necessarily selling cotton at the time of seasonal change.

Now, even if technology graphics are weak, in fact, trade is a net buyer of cotton futures, and speculators are not actively selling short, so the market should get considerable support energy.

At the same time, the market seems to be very difficult to make a breakthrough, because the quantity of cotton in the United States is very large, and the textile mills seem to be trapped in the face of the economic downturn.

As a result, it will be difficult for the market to shake off the current downturn before the existing inventory is reduced in the coming months.

We therefore predict that in the next few weeks, the market will continue to maintain the pattern of regional consolidation, but as time goes on, the market will eventually shift to a more bull market.