Home / Knowledge / News / Textiles / NY cotton futures collapsed
NY cotton futures collapsed
Feb '11
NY futures collapsed this week, with May dropping 2470 points to close at 177.23 cents, while December fell 1765 points to close at 115.74 cents.

Panic short-covering had provided the fuel that boosted the market to new historic highs last week, but as soon as most March shorts were finally out, the buying stopped and the market collapsed into a vacuum.

After the wild session last Thursday, during which March traded has high as 222 cents and May reached above 216 cents (via spreads), a powerful key reversal ensued on Friday, forming an impressive and very bearish 14-cents tall "black candle" on the daily chart. In fact, this was the biggest black candle the cotton market has ever seen in regular trading. This momentum shift was confirmed by the huge volume of 68'678 contracts and another big drop in open interest. Since peaking at 223'405 contracts on February 9, total open interest has dropped some 45'000 contracts to currently 178'450 contracts.

From a technical point of view there were warning signs that a momentum shift was about to occur. The parabolic nature of the move accompanied by the above-mentioned drop in open interest signaled that caution was warranted. Since futures were locked the limit and options trading was halted last Thursday, it prevented spec longs from taking profits, which led to pent-up selling pressure on Friday. With a 3-day weekend ahead and plenty of trouble brewing in oil-exporting countries, speculators suddenly seemed to be in a hurry to take some of their bets off the table.

Therefore, what was expected to be a relatively shallow correction has gained a lot of momentum, mainly due to the uncertainty on the global political front. The turmoil in Northern Africa and the Middle East and the resulting spike in oil prices have prompted some deleveraging of positions by hedge funds and speculators. This latest 'flight to safety' has put some pressure on a number of commodities as well as equity markets and has led to a spike in bond prices.

Money managers fear that the unrest could eventually spread to Saudi Arabia and cause energy prices to spike even higher, thereby jeopardizing economic recovery. Brent crude oil rallied towards 120 dollars/barrel last night but has since cooled off again, closing the session at 111.36 dollars/barrel. However, Brent crude has gained some 40 dollars/barrel over the last six months and combined with much higher food prices it all but guarantees that inflation will accelerate over the coming months. This puts policymakers between a rock and a hard place, because fighting inflation means higher interest rates, which the still weak and debt-laden economies of the West can ill afford at the moment.

Sticking to an accommodative monetary policy on the other hand would further stoke inflation, with abundant amounts of cheap money chasing a limited amount of goods and tangible assets. Given these circumstances and the inabilityby policymakers to take control of the situation, we believe that the most likely outcomes are either 'stagflation' or 'inflationary depression'.

Must ReadView All

Apparel/Garments | On 24th Mar 2017

UK online retail sales up 15% in February 2017

Online retail sales in UK have grown by 15 per cent year-on-year in...

Courtesy: Messe Frankfurt

Textiles | On 24th Mar 2017

Over 3341 exhibitors participate in Intertextile Shanghai

More than 3,341 exhibitors from 26 countries and regions participated ...

Apparel/Garments | On 24th Mar 2017

Tiruppur garment cluster hopeful of meeting export target

The Tirupur garment cluster is hopeful of meeting its target of...

Interviews View All

Giovanni Pizzamiglio, Paolo Crespi & Riccardo Robustelli
Epson, For.Tex & F.lli Robustelli

‘The percentage share of printing in the global textile market is pretty...

Vidhyaa Shankar. S
A Ganapathi Chettiar

'The usage of knits is getting into the boundaries of woven fabrics'

Siddharth Biyani
Mangalam Industries Pvt Ltd

‘The manufacturing sector is improving day-by-day, becoming better in...

Kerem Durdag
Biovation II LLC

Kerem Durdag, CEO, Biovation II LLC, provides an insight into future...

Giorgio Mantovani
Corman S.p.A

Giorgio Mantovani, MD of Corman, with a presence in both Milano and New...

Mohammad Hassan
Biax Fiberfilm

About one in every 20 patients picks up an infection while hospitalised....

Ritu Kumar
Label Ritu Kumar

‘Classics will return’ "There are a lot of people wearing western clothes ...

Jay Ramrakhiani
Occasions Elegance Wear

It is believed that by early 19th century, Varanasi weavers had moved away ...

Silvia Venturini Fendi
Fendi s.r.l

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

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


Letter To Editor

(Max. 8000 char.)

Search Companies


news category

Related Categories:
March 2017

March 2017

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


Browse Our Archives


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