Market Type: 9 (Most Bullish)
- Trends
- Secondary (intermediate-term): Up (Contra-seasonal)
- Dec cotton posted a new contract high of 91.00 the week of July 26 before closing 0.27 lower for the week
- This raises the question of a possible bearish spike reversal, though I’m looking for confirmation the uptrend has come to an end with a new 4-week low.
- The contract has posted a high of 90.90 this week
- Noncommercial traders continued to add to their net-long futures position
- Another 8,544 contracts for the week ending Tuesday, July 27
- Long futures increased by 8,736 contracts
- Short futures increased by 192 contracts
- Another 8,544 contracts for the week ending Tuesday, July 27
- Dec cotton posted a new contract high of 91.00 the week of July 26 before closing 0.27 lower for the week
- Secondary (intermediate-term): Up (Contra-seasonal)
- Fundamentals
- Bullish
- Dec21-March22 futures spread closed at 0.29 Thursday
- This spread looks to be in position to extend its secondary downtrend though (see attached weekly close-only chart)
- Dec21-to-July22 forward curve closed at an inverse of 2.07
- Indicating the long-term supply and demand outlook remains bullish
- Dec21-March22 futures spread closed at 0.29 Thursday
- Bullish
- Seasonality
- Bearish
- Dec Cotton 10-year index tends to top first weekly close of April
- Drops 12% through the third week of November
- Dec21 is sitting at a potential new high weekly close with Thursday’s price of 90.68
- Dec Cotton 10-year index tends to top first weekly close of April
- Bearish
- Price Distribution
- Dec21 closed last Thursday at 90.68
- Putting it in the upper 11% based on weekly closes back through the 2011 contract
- Dec21 closed last Thursday at 90.68
- Implied Volatility
- Moderate-to-High
- Dec Cotton ~ 26%
- High volatility tends to reflect increased noncommercial activity
- High volatility genially means option premiums are overvalued
- Moderate-to-High
- Theoretical Positions
- Producers
- 2021-2022
- It’s possible 25% of expected production was priced near 84.33 the week of March 1, 2021, following the previous week’s bearish key reversal.
- Another 25% of expected production might have been priced near the weekly close of 89.66 (week of July 19), based on a bearish spike reversal
- If not, up to 50% of expected production could be waiting to be sold on a stop below the previous 4-week low of 86.35
- More aggressive marketers could push this to 75% with that same stop price.
- If not, up to 50% of expected production could be waiting to be sold on a stop below the previous 4-week low of 86.35
- 2021-2022
- Producers
