Cotton futures spent the week under 50 cents and little more than similar prospects are expected for the coming week. Speculators, reading the technical points, are very content to sell the market lower.
Merchants are light buyers as the market falls below 49.50 cents, but turn seller when the market moves a few points above 50 cents. In a market going nowhere, the easy path is slightly lower, as much as three cents lower.
Struggling for comfort in the market, I asked a fellow analyst to write this week's newsletter for me. He never responded; I hung up when I tired of his laughing. I called another and his only comment was to use last week's comments, nothing had changed.
That is true with the exception of one possibility; the continued hot sunny weather over the Midsouth and Southeast allowed the top crop to progress, thus yields will likely improve for those regions.
We are very much at the point of just saying "ditto last week." Nevertheless, we must, everyday, ask ourselves the question, "What is going on that I understand, do not understand, and is this the day I should take some market action?"
With respect to market action, the only activity that might be pondered would be to buy the distant, deep out of the money calls. The rational is that cotton prices could likely be locked below 55 cents into February.
The May and July contracts offer better probabilities for higher prices. While there could be littlenegative news left to confront the market, suggesting downside risk is limited to about three cents, the typical January rally, coupled with improving export business will take prices higher into the spring. However, the May and July call options will carry a higher time premium, which must be weighted.
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Telangana State Industrial Infrastructure Corporation Limited (TSllC Ltd)")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Taiwan Textile Federation (TTF)")
