The Market May Have Formed An Important Short-Term Top.

New York cotton - this week Textile mill Actively buying / locking prices, the market also saw hedging activities. At the same time, a large number of call options in Zhengzhou China Commodity Exchange were short positions and super strong prices, which became part of the main factors of the market, pushing the price to exceed 100 cents / pound. Generally speaking, the speculative / fund uses the advantage of extra revenue to cut down long positions. However, the market did not stay on top of 100 cents for a long time, because the market was hit by a liquidation pressure. Yesterday, the market saw its biggest decline since July. On Wednesday, after a record high, the closing market ended at a low point, which could prove a major trend, which may indicate that the price has become an important (short) top.

Special concerns in China cotton Futures. The Zhengzhou Mercantile Exchange only gained 25% in January this year in 11. The volume is amazing. It is clear that a large amount of speculative capital has entered the market. The squeeze is short, but the reversal of the market seems to be only a matter of time. Empty disk volume Gradually reduce, and prices continue to innovate. This is the first warning signal for many hair. In addition, the Chinese government will intervene in a certain degree and try to suppress too much hype, which will be a matter of concern in the near future.

If ICE's cotton market is weak this week, it will be interesting to observe its significant impact on trading activities after the China stock exchange holiday. In short, the ICE cotton market has risen 30 cents / pound (or about 40%) between the low point of July and this week's high point. In a relatively short period of time, this is a big increase. Until this week, the rally has yet to show any meaningful adjustment. But now the wind has changed. However, it remains to be seen whether the current weakening market can be regarded as a correction of the market. There may be more anti trend actions near 90 cents. But even such a big increase will not change the broader technology side. In addition, the fundamentals of inflation remain unchanged, which should be enough to prevent a total collapse of prices.

The US us spot trading basis is still strong, which is contrary to the historical trend and inconsistent with many market information. It has a direct contrast with the recent two price breakthroughs of 100 cents / pounds. 1995/96 in the lunar new year, the cotton market broke through, and the spot market price lags more than 20 cents / pound. In the spring of 2008, the same market took place for weeks, and almost no price direction was found. The current supply and demand situation requires buyers to pay for the base, which is no different from the cotton trade price below 40 cents / pound. The seller's market applies to all potential sellers, whether they are cotton producers or manufacturers. Cotton merchants must pay to replenish their recent stock. In the next few weeks, due to the emergence of new offer, the base forecast is slightly loose.

Yarn prices - cotton prices have reached record highs, textile prices have raised concerns, and cotton has been news in many newspapers. Some media say textile mills are now trying to shift the recent cotton prices to the downstream market. In the Far East, cotton consumption is said to be decreasing in many markets, and factories are turning to man-made fibers in varying degrees. On the other hand, the main cotton consuming countries in China are more concerned about their cotton production and quality than their yarn / cotton price ratio. Textile mills are waiting for better procurement opportunities, hoping that the cotton market will adjust in the coming weeks. Only when the price of yarn and the downstream market have time to adjust can we predict whether the fundamentals support the cotton market.

India - the latest news shows that output is bigger than expected (probably more than 35 million India pack). However, it is too early to tell how much the output is due to the recent rainfall in the northern part of the country. Meanwhile, there are reports that the precipitation in Gujarat and Maharashtra is higher this year. India will convene another meeting on Monday (9.27) to decide the cotton export plan. Although the price of cotton fell during the ICE period, the price of India did not really weaken.

China - this week the Chinese Stock Exchange became a hype market again. The Zhengzhou mercantile exchange increased its volume and price in May of 11, rising to 1450 yuan / ton in just two trading days. At the same time, CNCE's most active 11 year January contract rose to 1617 yuan / ton. On Saturday, CNCE opened and National Day holidays began on Wednesday. After the National Day holiday, the two exchanges resumed trading on Monday.

The 10 day November contract and the 11 year January contract's daily trading limit on the CNCE stock exchange rose by 6-9%, and the two contracts were all closed on Tuesday. Spot cotton prices continued to rise. The price of CNCE's reserve cotton is close to 23000 yuan / ton, or about 10% higher than that of the previous weekend. The daily turnover is maintained at about 20000 tons. The remaining 80000 tons may be auctioned on four auction days before October holidays. In some cotton growing areas, the weather is unstable again, and the output may continue to decrease. China Trading Company's demand for foreign cotton is still large, but the offer is less and less. Many departments responsible for cotton are expected to discuss the current situation at television conferences and try to find ways and measures to stabilize the market. However, it is hard to imagine what measures can be taken at present.