The negative news about Omicron that began last weekend has dealt a heavy blow to most markets. Market trading hours have also been shortened during the Christmas holiday this week. The Dow Jones Industrial Index has fallen more than 1,000 points from Thursday’s high. Such a market atmosphere has made most markets Market traders are afraid to go long.
The latest CFTC position report shows that as of December 14, fund net long positions have dropped to less than 70,000 lots. Fund long positions have been the pillar of rising cotton prices. Once they change their strategies, they will have a huge impact on the cotton market.
President Biden’s Build Back Better plan hit a major roadblock over the weekend when West Virginia Sen. Joe Manchin said he would not support the legislation. His resistance did not give the government enough votes to pass the Senate. The senators’ pushback comes as inflation has reached a 30-year high.
On the 20th, ICE cotton futures closed sharply lower under the pressure of selling in the external market. The Dow Jones Industrial Average, gold and crude oil all fell sharply, and cotton was really unable to survive alone. After this continuous decline, the fund’s net long position is expected to decline further.
This Friday falls on the Christmas holiday, and the market is closed for one day. Before the holiday, market transactions become increasingly light, and it is easy to cause large price fluctuations at this time. In the short term, the price should trade around current levels. In the long term, the price difference between the December 2022 futures and the current contract reaches 16 cents. In the next few months, the price difference between the two will inevitably narrow significantly until they converge. Is it the December contract price that is too low or the March contract price? If it is too high, we can only wait and see. Both cotton’s fundamental factors and macroeconomic factors will greatly affect its development direction. This is also the biggest suspense in 2022.
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