Johnson On Cotton: No Obvious Reason For Whipsaw Market Movement Today

    Today’s cotton price (see: Doane Cotton Close: 3rd Day Of Wild Swings) left me feeling as though it was yesteryear. meaning 2011 with a 7-cent range and whip-saw type action. It is unlikely the reason behind the rally and then complete collapse is related to fundamentals, as nothing was accomplished in resolving this year’s various issues with supply and demand.

    cotton-bolls-open-03262014-facebookI suspect someone or some organization was ‘out of position’ and had to reverse, if not once then twice. A fat-finger type trade could also be the reason behind today’s bizarre behavior.

    It is possible the spec funds bought into the market and then were chased out, but their actions alone could not account for what occurred today. Whether we ever find out or not, it caused a lot of head scratching but a reversal of this magnitude should keep prices contained for some time. Estimated futures volume was huge at 56,095 contracts, the highest since June 14, 2013.

    My technician, Dave, phrased today’s action perfectly: “Yikes, what a confusing gush of rapid change in direction has been the action in May Cotton. Now it is back to looking like an obvious top, but keep your seat belts on.”

    Tomorrow’s export figure should result in similar sales as the week before of 50K bales with shipments remaining 300K+.

    I will send out my pre-NASS planting intentions report Thursday evening.

    ©2014, Sharon C Johnson, Senior Cotton Specialist, KCG FuturesAtlanta, Georgia, USA

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