Gartman letter featured cotton again, saying we cant get anyone to pay heed to whats going on in this market, but each new low is higher as is each new high, with the volume waning on weakness and rising on strength and the term structure backwardated. Our observation is that the spec long is just above 90% of the multi-year high, so there are indeed thousands of traders who agree with Gart, and are already on board.
Rains have come to the Llano Estacado, and more are forecast. Most of the rains have fallen east of the drylands of 1S, but parts of 1N and 1S have gotten that planting rain they have been missing. Bulls will claim that the rains are not enough, and while they have a point, they are missing the fact that the drought pattern from Halloween to Easter has changed. Many traders had already written off dryland for 1N and 1S, and now these huge districts are back in play. As we said in late April, the month of May is going to be fun.
Two worrisome events for the macro economy, one is the bottle-rocket lumber market, which will begin to hammer new home buyers. The other is the end of the credit card expansion. Consumers are larded up with record debt and have ceased adding to it.
Chinese specs have been buying their market, mainly buying the back months on weather issues in Xianjiang. This buying spilled over to our market yesterday and today. US futures typically and habitually make a run the day before, and often the day of a sales report. With the weather slowly shifting to better, the other prop to keep price up is demand. Our guess for total sales was 300 to 350 krb, and at 385 krb was just above that. Viet bought half the old crop sales and of new crop. Shipments were very good at 434 krb. The chart below shows a projection of 15.0 Mrb, or 15.42 Mb 480#.
The 55 day, 34 day, and this weeks low are all clustered from 8332 to 8355. This is a high-stakes support point for July, one that must hold to prevent large sell stops and long liquidation. Nothing else is nearly that important.
As always, please use protective buy and sell stops when trading futures and options.
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