Traders are locked in on hurricane losses and demand prospects, while the heavies are sending unmistakably negative vibes. Copper, aluminum and crude are all sliding south, while the $ has just pushed into a 16 month high. Sometimes we get too blinded by our markets own minutia and forget to glance around at the leaders. Cottons close cousins in the heavy industrial sector are dark.
We cranked out a new production estimate for the US and eased up losses from Michael. Our crop is now 18.65 Mb, down from 19.0 Mb early last week. This could change a little, but for the moment its the number. Exports are now pegged at 14.8 Mb, and end stocks are 4.6 Mb. And we have much more confidence in production than exports.
The knowns are mostly negative, those being sinking macro markets, sagging demand, and weak row crop prices. The unknowns are US and Indian crop sizes, and how long the economy can hang on to robust growth. Short term events are SD on 11/08 and notice on 11/26. Weather is turning more favorable, and it is likely that a few more spec longs will give up the ghost before notice. Critical support lies at 7600, and we lean toward that being broken headed into notice.
On 5/15/2017 cotton topped at 8718 and went on a correction of 2069 points, down 23.7% (a fib #), and time was 22/23 weeks. If the correction from 9650 is roughly the same, the point target is 7581, and the same % target is 7363. A similar timing would put cotton on a low the 3rd or 4th week in Nov. The 144 week avg and the positive trend line off lows of 5566 and 6684 is at 7400.
As always, please use protective buy and sell stops when trading futures and options.
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