|Yesterday we mentioned that the cotton market was behaving in a non-textbook fashion as prices are rising as bear spreads work. Another textbook rule is also being defied, that being a rising CPI in the face of falling wages. Wage growth has always been a major catalyst for inflationary pressure, but year on year hourly earnings are dead flat. The CPI has reached +2.3%, well above the Fed target of +2.0%. Probability of a Mar rate hike has reached 45%.
Sales were very good at 235 krb, even though not in the spectacular neighborhood. Turk was high at 88 krb, China took 20 krb, and BIP bot 36 krb. Exports were also good at 363 krb, and new crop sales were huge at 123 krb. Mills eyeballed the new crop Dec at 4c below July and did some bargain hunting. That will become more normal as long as the invert remains in place.
This years sales total is in a 4 way tie with 03/04, 04/05, and 11/12. Those years ended with sales (in running bales) at 14.7 Mrb, 15.8 Mrb, and 12.7 Mb respectively. The 11/12 year is fairly close to this one regards the current total, and its final. However, the slope of this years pace is more akin to the other two years which had much, much higher finals. This is 100% of the bullish argument for the rest of this market year, as traders wrestle with rumors and stories out of Asia about lower stocks. Sales have been hot since Aug, but will they stay that way?
The May closed below intial support at 7715 and will test a steep uptrend line tomorrow. Since the collapse last Aug there have been about 10 bearish reversals, and all gave way to a higher stair-step price. Hard to tell if this is THE top, but open interest, sentiment, and historical resistance from 7650 to 7800 spot should give bulls a chill. Trend change on violation of 7605 support.
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