Cotton has turned into something like a Southern bar b q event, as low and slow is what cooks pork just right, and is also how cotton has traded the last 15 months. Notices have kicked up to 148, while the Z/H spread has swung wildly to stick at half carry for the moment. 15kb of the cert stock level of 62kb has turned over, and our guess is that will eventually find a new owner. This should not impact price as that has already been done.
Weather shows a pretty harsh winter storm moving over Texas from Thur/Sun, with rain from to 1 mixed in with snow. Last weeks crop progress showed Texas at 60% complete, and lets assume this will be 70% by Friday. This weather event is not good for the crop, but if rain and snow add up to no more than it will not do much damage.
Varner View
The market is not moved by another storm over Texas, but the market does seem to have established a support area at 6150 March. We like owning the market here. One catalyst that could produce a modest rally in cotton is the heavy spec and fund shorts in the overall commodity complex. Various measures of positions show some very, very short markets, and this could change on a dime and result in some quick moves. Crude seems to have made at least a short term low, but a broad short covering rally will depend on the dollar hitting a near term high and correcting.
Technicals
Chart shows spot futures outside of notice. A trend line off highs of Mar, May and June 2014 was overcome by cotton on the roll from Jly 15 to Oct. This negative trend line was tested in Aug and Sep, and price held above it. A lower channel trend line converges with a negative trend line across several highs in the 6725. This is long term resistance and if tested in the next few weeks may offer a short. Seasonal is mixed into 10 Dec, then turns positive.
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