So, my abilities to call the cotton market are on the verge of shattering, unless you feel those abilities have long been shattered. I wonder. First, I believed the 81-82 cent floor would hold, but did mention the possibility 78 cents. Then last week I mentioned the 78 cent floor would hold; noting 75 cents as a possibility. The market fell through this week and still seems to want to move lower. I suppose I need another limb to crawl out on…Thus, the 75-77 cent floor will hold! Okay, I said it and I mean it, not that I had anything but full confidence the 81-82 cent floor would hold.

The tailspin in which the market finds itself can only be attributed to fundamentals, or can it? Fundamentals rule the long run, but technicals do have the authority to call audibles from time to time. This is one of those times. Yes, the world is awash with cotton, but the cotton that is both available in the marketplace and in demand by textile mills is limited. This is evident in cash prices as the drop in futures price is more severe than the decline in the cash market. For now, the ten cent drop in prices has ended. It is past time for the market to take a deep breath, begin its climb back to 78 cents, scale the 80 level, and then attempt to push above the former 81-82 cent support level.

Once the market broke its 81-82 cent support level the funds began to exit in mass, selling some fifty percent or more of their long positions. This opened the flood gates. At the same time the market was without any of its USDA reports to confirm the beefy export numbers that were being put up by the mills. That uncertainty led to more price pressure from the bears and bulls became even more defensive, exiting yet more positions. The selling has going on for slightly more than two full weeks and has led to the market being historically oversold. That is, everyone is betting on lower prices, so it is time to pull your oars in the opposite direction.

There can be no question that the congressional shut down of the government had a heavy hand in the marketΆs move lower. For example, USDA is still catching up with its reports. Three weeks of export report were released yesterday. Some 700,000 RB (all cotton) were sold in that period. Had those reports been released as scheduled the market would have most likely responded with a somewhat bullish attitude. Yet, that great unknown fundamental, government action, worked to the disadvantage of the cotton market, adding fuel to lower price fire. Let me be sure to add, the “government” did not cause me to miss the market. I “caused me” to miss the market. To paraphrase Pogo, I have met the enemy and he is me.

Export demand for U.S. cotton is extremely strong and in the coming months USDA will increase its export estimate. Chinese mills have been significant buyers over the past month and continue to remain in the market every day. Look for the March 2014 contract to challenge the 82 cent level.