So where do we go from here? The short-term trend is undoubtedly down, because the island reversal and promise of a double top has lead to spec selling, be it from new shorts coming in and/or existing longs getting out. We would therefore not be surprised to see March drop to somewhere around the 130-135 cents level, where it would once again become attractive from a cash cotton point of view.
However, there are still plenty of trade shorts to cover in a market that is becoming increasingly illiquid since there isn't much hedge activity left for the remainder of the season. We would therefore advise anyone with a short position in current crop futures to take advantage of this potential selloff, because we still feel that the market will not be kind to procrastinators over the coming months. Only time will tell whether the ultimate high is already in place or whether the market has another, even more powerful rally in store for us. In any case, we don't think that the shorts should hang around to find out!
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