Something sparked a rally today at 0830 in a strange grouping of markets. The Euro, soy, cotton, hogs, cattle, and wheat, all got a bid and shot upward for right at an hour. The only explanation that sounds plausible, is that it is possible China bought some markets across the board, to inch closer to the phase 1 trade deal requirements. China has satisfied roughly 1/3 of purchase requirements in ag products.
The Aussie weather bureau has declared La Nina is confirmed in the Pacific. This means a wetter, cooler continent, and should help the wheat and cotton crops.
The WTO has declared next Monday as "World Cotton Day." Sounds good to us, we will gladly share a toast to what was, and still should be, the world's most important crop.
Grain stocks were bullish all, as soy lost 50 Mbu, corn lost 250 Mbu, and wheat lost 80 Mbu. Cotton caught a "me too" bid after this release, and attempted to grab a coattail.
Grain balance sheets have been tightening, and one could say the same for cotton. What was once an 8 ball for end stocks, has slipped to 7 Mb, some say less. If cotton production has lost 200 kb due to weather, we cut exports a little, and carryout and ratio don't change much. If the loss is 1/2 Mb as some suggest, then we must also cut exports down to 14.29 Mb, so as to keep the ratio vs total supply at 60%. The ratio hovers at or above 40%, and there is no reason to be long at 66c.
These pages have written of the declining volatility and price range recently, much like the one that occurred for 3 weeks in June. Momentum is flat, the ATR (average true range) is below 1.0, and the Bollinger Bands are narrowing. In late June, cotton busted the sleepy, boring action, jumping 6c in 1.5 weeks. One technician recommended to buy both sides of the straddle, and see what happens. Interesting idea.