Lots of Noise
Trade talks, Powell talks, rate cuts, Queen and Trump, Mexico tariffs, the dollar, its all too much! How does a poor cotton trader concentrate with all of this outside noise? Balance sheets matter in the end, but there sure is a lot of clatter to distract us from our market.
Economic numbers have been dull to poor, prompting Fed Chair JP to hint strongly of a rate cut next month. This sent the $ down, and the SP up. A tailwind for all commodities will be present over the next few months as a cut or two, or three take place. Gold loves this setting, jumping $60/oz, or 4.7% in only 2 weeks. A general rise in the CRB would be good for all, especially row crops and softs.
We combed through acres again, just to see if the soy market and a few late rains had switched out some acres. It appears the US lost 150k to maybe 200k in late June. This doesn’t matter much, as TX is starting with best conditions in years…decades? See table below.
India’s monsoon has gone missing, some say sputtering. Looking at what India could produce, and the US, there is a decent chance both of these countries end up in a tie, for the first time ever. If the monsoon does cut India’s potential down to say 24.5 Mb, this will allow the US to shoot for record exports. A softening $, a sputtering monsoon, good demand, and very short specs combine to give cotton a chance to test higher ground.
Nearby retrace levels for July are 7026 (38%) and 7204/7233, the 50% and the Feb low. Watch for one of these levels to be tested next week. Open interest is 213k and slowly contracting. The lowest since July notice of 2017 was 200k, and that may be where this is headed. Sell a rally into next week.
As always, please use protective buy and sell stops when trading futures and options.
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