We got a very bearish S&D report this morning which initially sent the market lower, but since no sell stops were uncovered, we tested the 64.50 level again and settled just under 64.00. The rise in world ending stocks was very significant and surprisingly it did not have a more bearish impact on prices.
You can see the detailed breakdown of all the numbers in attached PDF. Volume was above average with 27,000 futures and 12,000 options in a day that also featured Dec/March spreading and some friendly options which also gave some fuel to testing the high side.
Export sales and shipments were in line with last week, but still on the low side with only 150k in new sales and 260k in new shipments. The biggest surprise this morning was the increase in ending stocks for China of almost 4 million bales, which lead to the biggest increase in ending stocks globally in over a year.
This was very unexpected to be such a large move in beginning stocks as well as current production, but it looks like we are getting a better idea why the high consumption numbers have has not been more bullish over recent months. In any case, the market is not trading fundamentals and also was stable today based on friendly grain numbers in Chicago and another up day for the stock market.
Technically, cotton tested the upside again today, but failed to hold any follow through as we continue to trade in a sideways trading range between 64.50 and 62.50. Open interest is still over 230k with rising cert stocks and a lack of demand. Unless the market can break through 65.00, we will probably be making another test of the 50% retracement level in the near future.
This level is almost the same as the 50 day moving average and if this is broken we should see more sell stops and spec liquidation. This will depend on the grains and equity markets since fundamentals in cotton are having very little impact.
-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)")
