August 2Nd Data Show That The Short And Long Market Is Currently Unable To Control The Market.

This week (up to August 2nd) New York

In December, the contract lost 42 points to 70.97 cents.

In the last 25 trading days, from June 28th, the settlement price of the December contract is no less than 69.51 cents, not more than 72.94 cents, which is restricted to the 343 point trading area. This is very dull, which indicates that the short and long market can not control the market at present.

When we observed the curve of December two and a half months, we noticed that in December, the price range of the contract formed a triangle. In this case, the equilateral triangle means that the high point is lower and the lower point is higher.

Because the trend line of the triangle is converging, it is only a matter of time for the market to break through this area at last.

Although triangles can sometimes reverse a trend, they are usually regarded as a continuation mode, which means that they usually maintain a trend with the general trend.

More specifically, the December contract fell below 70 cents, which will break the downward triangle. It may lead to a further test of the support position near the 65 cent contract in December. If it breaks 73 cents, it will indicate that the market is going up and up, which may activate a considerable new speculative buying.

Fundamentally speaking, the United States seems to have a lot of support.

Considering that the market is very quiet in the near future, today's US export sales weekly is surprisingly strong.

In the week ending July 26th, net sales of cotton and Pima cotton reached 221800 packages, of which 39700 packages required immediate shipment.

Last week, there were 19 more markets to buy American cotton, which showed that cotton cotton was widely supported at the current level.

The export volume is very constructive, which is 310500 packages, so the total export volume in 2011-12 is 11 million 650 thousand, which is 5 days from the end of the sales year.

This means that the US exports will exceed the estimated 11 million 600 thousand packages of the US Department of agriculture, which exceeds about 200000 packages, so that the inventory will be reduced to about 3 million 100 thousand bales at the beginning of this year.

As we mentioned last week,

Before entering the market, the supply situation in the US is still very tense.

The export contract has about 4 million 400 thousand packages, most of which require immediate shipment, and 900 thousand packages are the needs of the domestic textile mills in the next three months. Some shippers may find it difficult to find a cotton source for performance.

When prices fall, cotton traders may be too cautious to ensure supply and fail to fulfill sales contracts. Now they find themselves needing to fill loopholes.

It seems that certified stock can be used for this purpose, because since July 10th, certified stock has been reduced by 94041 packages, only 36049 packets this morning.

For the futures market, the tension in the spot market is relatively unimportant. Since there are almost no open positions in October (only 358 contracts), there will be a lot of new cotton for clearance in December.

However, the December contract may prove to be a very dangerous contract again, especially if there are some things that are not conducive to the growth of cotton in the field.

Considering the crazy weather patterns we have experienced this spring and summer, traders will hold their breath before the cotton finally leaves the cotton field.

We feel that trade, to some extent, thinks that the December contract fell to below 70 cents for a very short time.

This week, the external market provided little impetus, and soybeans and corn increased by about $16 / bushel and $8 / bushels in the near future.

Traders are waiting for the US Department of agriculture's report to be released in August 10th. This report will give the first view on the potential yield of crops affected by drought.

According to unofficial estimates, we feel that the market may get a downward surprise. Corn may be reduced by 20 bushels / acres compared with the July report, and soybean may be reduced by 4 bushels per acre.

Although some demand destruction has emerged, we believe that the price of corn and soybeans may rise very high, inhibiting demand and meeting a substantially reduced supply level.

So where do we go from here?

Still hesitant, though technically, the market should form a breakthrough in the next two weeks from the current triangular situation.

In view of the fact that the US Department of agriculture is about to release an important report next week, we should see a more active market in the coming days.

Because we believe that the longer term outlook does not prove that the price is below 66/67 cents, we will become a buyer when the December contract falls below 66/67 cents.