Home / Knowledge / News / Textiles / Cotton market wakes up from 5 week losing streak
Cotton market wakes up from 5 week losing streak
01
Dec '08
Cotton futures began the week with a limit up session which was repeated again on Wednesday as the market prepared for the Thanksgiving break. Fridays saw the fourth consecutive higher close in the last five sessions.

The cotton market snapped a 5 week losing streak Friday; closing at the best level since November 5th. The active March gained a whopping 611 points last week closing at 4791 or nearly 1,200 over the AWP However, March was still down 62 points for the month. December 2009 finished the week 535 higher at 5148 Exactly why cotton performed so well this last week is certainly not clear. It seemed that the buying might be short covering since there was not a hint of positive economic news even remotely related to cotton.

Spec short covering was initially suspected however, that proved to not be the case. Open interest actually went up on Wednesdays limit up move. Additionally, cotton lost about 45,000 contracts of open interest last month. Certainly, one might very well attribute some of the strength to the "statement" that Cargill seems to be making in taking every available delivery against the December contract. Cargill has just about stopped them all; a total so far of 6,760 contracts or approximately 676,000 bales. Then one had to assume they already own at least some of the cert stock since they stopped over 210,000 bales in October.

A case can be made that they now possibly own three-quarters of the certificated stock. With most of the new crop going into the loan, the cert stock could be the cheapest cotton around. Additionally, the inversion of the March contract over the May contract speaks to the near term tightness of quality cotton.

Certainly strength in the stock market has also helps return some consumer confidence to the market. Until Friday, Stocks had not closed higher 5 consecutive days since July 2007. Considering the boards premium to the AWP, it is surprising that hedge selling did not seem to slow the technical strength any more than it did. Then adding to the mystic of cotton rally is the fact that the dollar index has been extremely strong in reaction to the terrorist attacks in Mumbai.

One thing is for certain; cotton has had very, very good technical action the last week. The short term moving averages have actually turned up. We have broken downtrend lines and are now moving above the really key intermediate indicators such as the 20 and 21 day moving averages. In fact, We have rallied 860 points from the lows just six sessions back.

That is impressive any way you look at it. The last two weekly letters have commented on the likelihood of a five to 10 cent corrective, bear market rally following a close above 4445. That is what I believe we are seeing. Upside targets from a purely technical basis run from 4900 to 5300. However, do not be surprised to see tough overhead resistance 1,200 to 1,500 over the AWP.

Certainly "a bottom" has occurred and technically a very strong reversal which should now attract buying on dips. However, probably not "the bottom" which will take a clear improvement in demand. With the current environment, demand must be considered fragile. A sharp increase in world prices resulting a corresponding rise in the Cotlook Index could shut off or sharply curtail the demand that we see now but also release a glut of cotton from the loan. Fundamentally, one would need to believe that the stock market and global economics had bottomed.

For awhile, it looked like the cotton market was a bottomless pit. Now, there is a chance that the base building and rebuilding process has begun both here and in China.

SFS Futures

Must ReadView All

Apparel/Garments | On 23rd Feb 2017

NAFTA renegotiation puts Mexico-US jeans trade at risk

The almost imminent renegotiation of the North America Free Trade...

Rick Helfenbein (left), president and CEO of AAFA, with Juan Estrada, chief of party, Hub; Courtesy: Hub

Apparel/Garments | On 23rd Feb 2017

AAFA inks agreement for best manufacturing in East Africa

The American Apparel & Footwear Association (AAFA) has entered into a ...

Mango vice-chairman and member of the board of directors Daniel Lopez (L) with Ananth Narayanan, CEO, Myntra & Jabong. Courtesy: Myntra

Apparel/Garments | On 23rd Feb 2017

Mango awards distribution & management rights to Myntra

Mango, the Spanish fast fashion brand, has awarded its master...

Interviews View All

Sanjay Desai & Ashish Mulani
True Colors

Digital textile printing will be the technology of the future

Viral Desai
Zenitex Mill Pvt Ltd

Full of green energy

Anshul Sood
Oceedee

‘Indian footwear market is nascent and largely a trend follower’

Silke Brand-Kirsch
Schlegel und Partner

Silke Brand-Kirsch, executive partner of Schlegel und Partner, a leading...

Mark Paterson
Technical Absorbents Ltd

Mark Paterson, R&D manager of Technical Absorbents Ltd talks about Super...

Johan Berlin
InvestKonsult Sweden AB

Investkonsult Sweden AB has been buying and selling second-hand textile...

Pranav Mishra
Huemn

Designers Pranav Mishra and Shyma Shetty’s Huemn is known for its...

Silvia Venturini Fendi
Fendi s.r.l

"Yes, my confidence and positive attitude are my strengths and should be...

Mike Hoffman
Gildan Activewear SRL

Gildan Activewear, a manufacturer and marketer of branded clothing and...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH
February 2017

February 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

SUBSCRIBE


Browse Our Archives

GO


eNEWS
Insights
Subscribe today and get the latest News update in your mail box.
Advanced Search