Doane Cotton Close: Oversold Market Bounces Higher

Cotton planting has reached 62%, up from 46% last week and just 2 pts behind the 5-year average and 6 pts ahead of last year when only 52% was planted at this time. A week ago the planting pace was also 2 pts behind normal, but 9 pts ahead of a year ago. So even though the gap with “normal” planting progress has stayed the same, the lead in this year’s pace over a year earlier has shrunk by a few points in the past week.

Rains in Texas were NOT too late to help cotton prospects and were even more abundant than forecast. Futures have been very weak as a result. Fund selling was aggressive last week as well. The CFTC report showed that collectively the trading funds unloaded over 10,000 contracts from their net long position. Cotton had closed lower 12 of the past 13 trading sessions before finally bouncing sharply higher Thursday morning out of clearly oversold conditions.

Nonetheless, there was little else for bulls to cling to before the rains came to Texas and even less now that they have. The trend is down, Thursday’s rebound notwithstanding. Old crop futures seem headed for a 62% Fibonacci retracement of the entire bull move from last fall, down to about 83.0.