Cotton futures were not immune from whipsaw action in the wake of last weekendΆs incursion into Ukraine by Russian troops. And again the action in cotton seemed tied closely to the coattails of action in the DJIA as the tradeΆs barometer of demand growth for cotton; down Monday then popping higher again on Tuesday.

The technical action was especially significant, with futures poking back above the former long-term uptrend line violated by futures a week ago and seemingly setting up a sustained downturn. The rebound effectively negated the bearish breakout of last week and put futures in position for another run to recent contract highs.

That test was delayed a day after the International Cotton Advisory Committee (ICAC) raised its forecast for global 2014/15 cotton carryout yet again, to just under 21 million metric tonnes and very close to projected ending stocks for 2013/14, which represent nearly an 11-month supply at current global annual usage.

But discussion about El Nino returning and stellar export sales on Thursday generated renewed buying enthusiasm the knifed futures right through those previous highs like a hot knife through butter – especially when Chinese purchases were still a significant factor in a new marketing year high for weekly shipments and new sales 60% above the 4-week average.

Now add in the reality that over half of those very burdensome global ending stocks are held in “reserve” by China. TheyΆve pressured prices last week by announcing they would offer government stocks to domestic mills at much lower prices than before. But continued strong U.S. sales to China shows domestic mills still want U.S. cotton!

At weekΆs end, the weekly chart is a bit problematic in that we tested last yearΆs highs, but could not close cotton futures at those highs. That strongly hints action yesterday and today was far more “technical” than “fundamental” in terms of driving force and staying power; especially since new crop contracts couldnΆt even close with gains at all.