Bullish traders could certainly be forgiven for thinking the results of the Monday afternoon Crop Progress report would boost the cotton market Tuesday, since those clearly showed the condition of the current U.S. crop had deteriorated substantially. For example, the percentage of acreage rated good to excellent fell from 47% to 44%, while the poor to very poor ratings jumped from 17% to 24%. The report also reminded the industry the current crop was planted in a laggardly manner and is running behind.

And yet, ICE cotton futures rose only slightly, with the daily October futures settlement, at 86.68 cents/pound, up just 0.31 cents on the day. This may simply have reflected previous industry expectations for substantial deterioration in the crop.

One has to wonder if ongoing U.S. dollar strength is weighing upon the market, especially since concurrent equity market rally seems very supportive of the outlook for apparel demand. As pointed out in the past, the rising greenback increases the relative cost of U.S. goods and services, thereby amplifying the cost of rising commodity values on domestic markets. If the dollar keeps rising, life could become increasingly difficult for bullish traders.

Actually, a look at the daily charts shows the nearby contracts have been trading at levels quite comparable to their respective 10, 20 and 40-day moving averages. For example, the December future has bounced from support around its 10-day MA lately, but has proven unable to overcome selling around its 20-day MA. Thus, a close outside that range might signal the direction of the short-term trend. Of course, things could change dramatically when the monthly WASDE report is released Thursday morning.