Well, commercial bargain hunters finally jumped in and started buying today, giving futures a good rebound. But itΆs likely just a temporary rebound after the chart damage that occurred on this weekΆs break. HereΆs the week in review:

Cotton just seemed to run out of willing buyers on Monday and that alone was enough to trigger some “long liquidation” by the specs who have fed this rally in old crop. Their selling fed on itself and triggered new selling by others and resulted in a pretty clear “double top” just above 89 by breaking the long-term uptrend line in the March contract on Tuesday and then confirmed the trendline break with yet another lower close Wednesday until commercial bargain-hunters jumped in Thursday to spark a rebound.

Using Fibonacci retracement theory to estimate where the next lines of technical “support” might lie if ThursdayΆs rebound proves temporary, thereΆs risk of a 38% retracement risk to 84.60. If that canΆt hold, look for a 50% retracement to 83 and if that canΆt hold, a 62% retracement of the long bull move from fall lows would take the March to 81.75.

Cotton has been a tale of two markets for months. The old crop situation, while abundant globally, is pretty tight in the U.S., especially when you consider the short supply of high-grade cotton. Strong export demand had many thinking ending stocks could end up even tighter. But in recent weeks, the export news has not been good. This week was the most disappointing for market bulls yet: Early in the week export inspections were down 15% from the previous week and 16% from the 4-week average.

Then, on this morning, the weekly report of new export sales was even worse: Sales down 62% from the previous week and 87% below the 4-week average. ThereΆs still a bit of a “cushion” in YTD sales over the pace needed to make USDAΆs current forecast of 10.5 million bales, but it has shrunk to just over 100,000 bales from nearly 500,000 bales a month ago.

Now add in the reality that over half of the global ending stocks are held in “reserve” by China, with no clear signal yet how aggressively they will put this cotton out to the market now that theyΆre changing to a target price & deficiency payment system for their domestic producers for 2014. The new-crop outlook would seem to be quite bearish in light of ChinaΆs changing policy.

What if they decide to continue limiting imports and attempt to work down their mountains of reserve cotton domestically? Already itΆs pretty much assumed cotton acreage will drop 10% in China, but it could drop even more if the new target prices turn out to be at or near current global prices instead of the 50% premium theyΆve been paying farmers.

We also know via the National Cotton Council that U.S. producers plan an 8% increase in acreage from last year. WeΆre conducting our own acreage intentions report right now and itΆs critically important that Doane subscribers who grow cotton participate so we get a reliable “sample” of cotton producers in general. If you havenΆt already participated, PLEASE go on line and take the survey. Our results will only be as reliable as you help it to be by telling us your plans.