By Keith Brown, DTN Contributing Cotton Analyst 

Taking its cue from a recovering Dow Jones, the cotton market finished back above the 90-cent mark Tuesday. Subscribers are aware of Monday’s massive financial implosion, which was caused by the potential default of a Chinese real estate company.

Its outstanding debt is rumored to be greater than 300 billion U.S. dollars. At any rate, Tuesday the stock market witnessed a decent recovery which inspired cotton, among other commodities, to follow suit.

Traders are awaiting, with keen interest, the outcome of the Federal Reserve’s two-day policy meeting. The gathering is set to conclude Wednesday with some sort of statement regarding tapering, which is the pulling back on artificial stimulus from the U.S. economy.

Interestingly, according to the Stock Trader’s Almanac, the month of September is historically a bearish time for stocks and has evolved into several steep October declines. Of course, at the heart of the Fed’s decision is the plight of the U.S. dollar.

Despite cotton’s 300-point spill of Monday, open interest remains very high. To that end, speculators hold a very large net long position. If the Chinese economy were to endure a setback, one would think prices could fall even deeper, causing the heavily laden net long funds to liquidate. In addition, with the 2021 harvest unfolding, there ought to be a noticeable uptick in commercial selling.

For Tuesday, December settled 90.03 cents, up 1.01 cents, March ended at 89.34 cents, plus 0.95 cents, and Red December (2022) ended at 80.71 cents, 0.44 cents higher. Tuesday’s estimated volume was 24,989 contracts.