Home / Knowledge / News / Textiles / NY cotton market seems to be ready for a bounce
NY cotton market seems to be ready for a bounce
23
Apr '11
NY futures followed the same pattern as last week, with July dropping 1149 points to close at 167.51 cents, while December was down just 31 points to close at 132.14 cents.

Since the cash market has been declining for several weeks in a row now, it was just a matter of time until the futures market would begin to crack as well. Over the last ten sessions the July contract has fallen by more than 30 cents or about 15 percent, after the breach of important technical support (50-day moving average and long-term uptrend line) prompted widespread liquidation.

While open interest was holding up fairly well until last week, it dropped by a hefty 31'000 contracts over the past five sessions and stood at just 166'731 contracts as of this morning, the lowest it has been since July 28 last year. The market seemed to finally give up on the idea that a short squeeze in the May contract would propel values significantly higher.

However, the short-squeeze still took place, but it played out via a record inversion in the May/July spread instead of a directional move. Open interest in the May contract was still stubbornly high at 15'503 contracts at the beginning of session, which was the last before First Notice Day on April 25th. Shorts continued to scramble out of their positions by rolling into July, pushing the inversion out to over 1900 points by the close.

After the close we learned that only 13 notices (1'300 bales) were issued for Monday, with all of them being stopped by Allenberg. This indicates that Allenberg owns all of the remaining open longs in May and this could spell trouble for whoever remains short at this point. Not only does Allenberg already own part of the existing certified stock, but they apparently have an appetite for more. The fact that there seems to be a strong taker should be supportive for the market when it resumes trading next week.

The market seems to be ready for a bounce, not only because of what is happening with notices, but because we feel that the selling has run its course for now. July, which is now the lead contract, had to endure a lot of pressure over the last couple of weeks. Not only was there selling from shorts spreading out of May into July, but there was also options related selling as owners of cash cotton were seeking protection via bearish strategies and then there was plenty of long liquidation based on technical weakness.

According to the latest CFTC report of April 12, which is already a bit dated, index funds owned 56% of the net long in futures and options, with all remaining speculators owning 44%. The trade was on the other side holding the net short position. Since index funds will have to sit tight until the next rolling period at the end of May and speculators just reduced their net long position considerably after sell stops were triggered, we don't expect a lot more selling at this point. On the other hand the trade may start covering shorts more aggressively now that the market has given them a 30 cents break in a matter of just two weeks. After all, there were still about 2.9 million bales of fixations open in July as of last Friday.

Must ReadView All

Apparel/Garments | On 27th Feb 2017

Myanmar sets up new committee to revise minimum wage

The Government of Myanmar has set up a new committee, replacing an...

Textiles | On 27th Feb 2017

Textile industry can boost South African economy: Minister

The textile industry is one of the most strategic platforms through...

Textiles | On 27th Feb 2017

KBR bags LBED revamp contract for LG Chem's ethylene plant

KBR, Inc has bagged a technology licensing and basic engineering...

Interviews View All

Angelina Francesca Cheang
MY ANJE

'Consumers in the age-group 21 to 38 are driving the activewear trend'

Viral Desai
Zenitex Mill Pvt Ltd

Full of green energy

Jim Desai
Blaiva Fabricaa

Fashion industry likely to remain labour-intensive in coming years

Steve Cole
Xerium Technologies

Steve Cole of Xerium Technologies discusses the industry. Xerium is the...

Silke Brand-Kirsch
Schlegel und Partner

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

Ashok Desai
Bombay Textile Research Association

Bombay Textile Research Association (BTRA) is a leading name in textile...

Sonam & Paras Modi
SVA

Sonam and Paras Modi's Sva Couture is synonymous with head-turning...

Robert Brunner
Devereux

Golfwear and menswear brand Devereux is set for greener pastures. Robert...

Pranav Mishra
Huemn

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

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