No Good Reason
No real reason for the price drop today, other than there was no weather scare going into what was a 4 day holiday. The July contract goes dead tomorrow, and the spot chart will get an instant beauty makeover via a near +300 roll. This doesn’t mean much, but July will fade away keeping roughly a 65% carry to Dec, reflecting modest to poor demand.
Weather was good over the weekend, with spot showers across Dixie, and especially the Llano Estacado. Its going to be some real fun estimating production for this key area, with some very wide guesses being circulated over planted, failed, prevent, and abandoned acres. But what did get planted, and emerged, is looking like one fat crop, as we approach the halfway point.
Indian weather came through the weekend the same as it went in – the nw needs more rain.
Cotton took a pounding today more for the lack of bullish news, than anything negative. The on-and-off trade deal is the one real catalyst that could send cotton climbing, but this thing is an elusive moving target. The politics of this would seem to favor a done deal in early calendar year 2020, for maximum benefit to Trump going into the elections. Looking at China’s balance sheet, it will hold about 40% of world stocks at the end of 19/20, or about 32 Mb. Their “normal” level of stocks used to be between 12 Mb to 20 Mb, or 30% to 50% of use. They can easily shift down to 20 Mb, roughly half of use. This is negative longer term.
The rally off the 6/10 low of 6470 looks like a typical a-b-c correction, so we must assume that this low was a 3, not a finishing 5. Strong support lies from 6550 to 6470, but this could give way if the final 5 is here, and not 6/10. A seasonal low is due 7/17.
As always, please use protective buy and sell stops when trading futures and options.
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