All went up together, so it looks like all will go down together. In this era of "macro" trading, one only needs to "know the money flow," and forget about balance sheets. In spite of a thick gumbo of fall weather delays, cotton is in the middle of a broad, "risk off" trade that appears to be just beginning. Who knows if markets correct into the election then rebound, or keep going South?
These pages have written much as to the market being "over valued" relative to the balance sheet, and we have done much work trying to figure out just what the balance sheet should be at +70c. Best we can come up with is a carryout from 5.6 Mb to 5.9 Mb, which would be a cut of 1.3 Mb to 1.6 Mb in a combination of a lower crop (mostly) and small increase in exports.
The other, more short term aspect is the setup going into rolls, liquidation and notice. Cert stocks have risen from a summer low of 6 kb to 40 kb, but that is still a tiny figure. Good demand, a wet and late harvest, and a tight basis have combined to keep cotton off the board. By this weekend, if the bale is not in a cert warehouse, it will be difficult to be ready for delivery. Then there is the huge spec long position, to match out against the huge mill short. Expect an increase in volatility, and a choppy correction into notice.
The stock market has gotten a case of "spooks" over a blue wave sweep, and more Corona nonsense with lockdowns. It took a while but it looks like the stimulus has worn off, after a powerful, all market 6/7 month rally. With specs long in most markets, some at or above records, it will take a while to shake loose the topwaters. Even though all professional traders we know are cutting end stocks for cotton, this is well anticipated and the market itself has factored in end stocks in the 5.75 Mb area. History leans heavily on the bear side from the end of Oct to notice, and we will join in.
There is a timing event 4 of the 5 days this week, and the market chose today to observe an equal count from the Apr low to the 7/09 high. This matches perfectly the count from 7/24 low to today's high. There remains another equal day count on Fri, and end of month. With a confirm of a top and reversal, specs can sell quick rallies.