July 22, 2006
Sometimes this business can just beat you to death. Can you imagine what it is like to lay your opinion out there (strongly), have people buy the idea, then have the idea lose money for well over a year while you keep saying, "It's about to GO", over and over? There's financial blood everywhere, but every time you look at the trade, all you see is the same thing you have been seeing...what your experience tells you is an incredible opportunity, but only for those who are on it when it finally does happen...which usually means there are many of those original trusting souls left by the wayside...UNLESS they stay on/get back on the trade.
I don't know if this is the bull market beginning, or just another fake out, but after making new lows three weeks ago, and then showing no downside follow-through, December Cotton closed up 3.3 cents this past week, ACHIEVING ITS BIGGEST WEEKLY GAIN SINCE THIS CONTRACT STARTED TRADING 1 1/2 YEARS AGO. I don't know if this is indicative of things to come but I have seen this sort of action at countless market bottoms, where a market has just laid there and laid there, or has drifted over and over to new lows...and then, for no "obvious" reason, suddenly leaps hard off those lows...enough so that anyone who has been getting plastered on the long side, and no longer owns it (having been washed out three weeks earlier), finds the idea of having to buy it after a 4 cent rally (in this case) just a little too much for their nerves. Since nobody is screaming "Jump all over it!", and everybody is so, so beat up after losing money trying to own it for so long, what most people do is, "wait to see what happens".....When what you are supposed to do is, FORGET THE PAST and JUST BUY IT AGAIN.
Cotton, maybe moreso than many commodity markets, historically has had a decided tendency to make extraodinarily quick, big reversals...four examples of which I've included below...The four years shown are also bull market upturns where the low happened to come in July or August.
I obviously don't know when Cotton is "going" or I wouldn't have been sitting on it for over a year now...But I do "know" somewhere in its future there WILL be a MAJOR bull market move, and when it happens I want to be on it in a big way...Maybe the hot dry weather is finally kicking in as a market force...Maybe China is quietly starting to load up in our futures market in anticipation of cash market purchases (that's how end users utilize the market)...Or maybe it's just that Cotton is ready to go...At any rate, I have been buying cotton in the hole the past two weeks and I will be buying it tomorrow (Monday) morning, and every day this coming week, whether it is up, or down, or sideways...I have been around this business long enough to know we can be 10 to 15 cents higher in NO time at all, especially after you have watched it do nothing for such a long, long, long time. Futures are inherently volatile. They DO move and the longer they don't move, the bigger the move you typcially get when they finally get started.
Give me a call if you want to know more...
Four reversals into bull moves that started (out of nowhere) in July or August....
Here is the current December contract...