Cluster Cotton: General Trend Of Cotton Market Sinking Price Upside Down

　　 This week (as of July 22nd) New York Stage cotton Rebounded, and the December contract rose 124 points to 74.71 cents.

It is not easy for traders to see the trend of cotton market in the near future. Because not only is the signal contradictory, but people also need to be aware of the turbulence in the external market. Since the middle of June, the general trend of cotton market has been sinking, the price is upside down, and the stock market has no arbitrage.

October / December (inverted 486 points), or even December / March (inverted 60 points) all have some meaning, because the certification stock is all gone (as of the remaining 75782 packets this morning), before the new cotton enters the market, the circulation channel will not be sufficient supply. But in addition, there is a lack of arbitrage in the market, because only 168 can be used in the four months of March and July 2011, even though the US cotton output is expected to reach 19 million packages. There are 361 upside down points between July 2011 and December 2011. Therefore, although the Orienteering trend seems to tell us that cotton production is putting pressure on prices, the spread seems to be that the opposite direction is real.

This dichotomy may be related to speculators and index The fund responded to the drop in the market, selling 2 million 700 thousand bales of cotton between June 22nd and July 13th. Since all their locations are concentrated in the December contract, which accounts for more than 70% of the total volume, they can have an impact on the recent contract, but the impact on the spread is relatively small, and the difference is the trade playing a major role.

What we can tell is that the market is not pessimistic, at least it will not continue to fall from the current level. We may not remember why stocks are tight, and inventories barely satisfy consumption, which means that inventory levels may continue to be tight. Since June 3rd, the one million package certification stock has disappeared. The weekly export weekly of Zhou Fu issued a clear signal. This year, we encountered an unusual situation.

Last week, American upland cotton and Pima cotton again. Sale 382000 packages, of which 92700 are shipped immediately. This has led to a total of 14 million 100 thousand statistical packages this year, of which 11 million 500 thousand packages have been exported. The number of sales to be processed in the sales year is 2 million 600 thousand packs, while the market remains only 16 days in the year. The remaining quantity is about 1 million more than that of last year. We therefore estimate that about 1 million 800 thousand packages will be spanferred to the next year, and that part of the cotton will increase to 3 million 300 thousand of the 2010/11 statistics package that has been sold.

In other words, at the beginning of next year, there will be at least 5 million 100 thousand bales of cotton, plus cotton sold before the end of this month. By August 1st, the number of books may be close to 5 million 700 thousand packs, because according to the US Department of agriculture, only 2 million 900 thousand bales of cotton remain at the end of July, so there may be a shortage of 2 million 800 thousand bales of cotton at the beginning of the new year, which means that the cotton that is commissioned by the existing contract has not yet been produced. In August and September, the gap may be bigger before the new cotton picking begins. In addition, the current situation is quite unusual, because in general, inventory is generally larger than existing entrustment at the beginning of the new sales year. Last year, for example, there were 6 million 340 thousand packages in the beginning of the year, and the Commission was less than half that.

Therefore, it will take a while before the new cotton can enter the market to fill the trust gap. Therefore, the contract price in October is a lot larger than that in December. The market believes that when the October contract enters the notice period at the end of September, there will be no new cotton on the disk. Judging from the upside down situation of the December contract in March, the market began to feel the same about the December notification period. We can not quite agree with this view for several reasons. First, cotton production is relatively early. Second, after September, when the main importing countries, such as China and Turkey, pick up domestic cotton, export sales will begin to decrease. Third, cotton traders will want to establish a position arbitrage. Fourth, there is no need to make use of so many certified stocks to impose positions on the market, and there is still enough time. Before Christmas, cotton can wait for tenders. Therefore, when we endorse the October contract upside down, we feel that the /3 December contract overhang will eventually be corrected, though it will take some time.

So how do we do it? In the past 13 trading days, the closing price of the December contract fell to a narrow interval of 73-75 cents, forming a wedge pattern. The energy at both ends has weakened, although we can see that the volume of spanactions increased this week and continue to expand to 21000 contracts today. The wedge will be broken sooner or later, which may push the market up by a few cents. From this point of view, we believe that the market will break through because we feel that the sales of speculators are exhausted, and trade likes to enter the market at a lower price. At the same time, from a fundamental point of view, when the new and old cotton handover, the market crash is meaningless, because the stock situation is tense. The external market has become more positive, and the dollar has weakened again. Short term speculative short positions increase, if activated buy stop point, it may form a catalyst for market growth. We therefore believe that the market has a good chance to rebound to the top of 70 cents in short term, though we expect the new price will not be so high.