Market Report

Weekend Cotton Bullets – 25/06/2023

July expires near its life of contract lows!

Money and success without anyone to share it with is a very lonely place!

CTN23 78.06 (-1.23)
CTZ23 78.67 (-1.48)
CTH24 78.88 (-1.41)
CTK24 79.14 (-1.27)
CTN24 79.37 (-1.13)

Zhengzhou WQU23 – 16,495 (-120) – 21st June

Cotlook “A” Index – 92.20 – 22nd June (Unchanged)

Daily volume – 29,857
AWP – 65.50
Open interest – 170,728
Certificated stock – 20,946

N23 / Z23 spread – (-0.61)
Z23/H24 spread – (-0.11)
H24/K24 spread – (-0.26)
K24/N24 spread – (-0.23)

July 1st Notice Day – 26th June 2023
December Options Expiry – 10th November 2023
December 1st Notice Day – 24th November 2023


– Friday was the last day of trading for the July 23 contract before 1st notice day on Monday. Wild N23 did not disappoint in its last week of trading with a 487 point trading range between 76.91 and 81.78 and closing at the lower end of its life of contract range. There are just 2,548 of open interest in this contract that will be largely cleared up before the end of next week.
– New crop Z23 was, as expected, rather less volatile trading in a 300 point range between 78.20 and 81.20 and closing below trend line support that bodes for lower prices to come and will be of no surprise for readers of EAP reports in recent weeks.
– Volume averaged 31,883 contracts daily and for once put volume outnumbered calls albeit marginally. Implied at the money option volatility is below average at under 22% for Z23 and means protection using options is cheap! We expect it to get cheaper still and the trading range for the season ahead to disappoint those expecting the sort of trading ranges witnessed over the last 2 seasons!
– EAP have bleated on most of the season on the comparisons between N12 and N23. Both were clearly inverse as can be seen below and whilst not completely mimicking each other we feel the point is reasonably made!

– The below chart is of Z23 and noting we are nearly 6 months into the 17 month season EAP like to look at, we think it worthy to look at the market from a technical point of view only, to determine what might happen next!
– We had been looking for a break one way or the other out of the contracting triangle expecting it to be to the downside. This has now happened and note how prices have broken the trendline support! Moreover the medium (50 day) and longer term (100 and 200 day) moving averages are all converging and will likely offer stiff resistance to any potential bounces!
– Technically speaking, EAP would expect 80.49 (200 day) and the higher 82.09 (100 day) to be stiff resistance and if one was not already short but wished to be, then these are levels to consider!
– We would also add that we have seen on twitter this weekend, certain cotton “gurus” (supposedly savvy on the cotton market) trying to catch the falling knife by advocating that cotton is cheap and likely to go up! These characters have many followers and noting the crowd is usually wrong, we feel they may face some more pain in the weeks and months to come if prices head even lower as we expect!
– As always, the low for Cotton this season will almost certainly coincide with a spike lower and intraday turnaround of an impulsive nature, that is typical for Cotton (and in truth) for every other commodity when it reaches a significant turning point. We have not seen that so stay with the trend, like hedge funds do, and expect lower prices and sell the bounce if we get one!

– The CFTC COT report as of last Tuesday showed Managed Money (MM) to be exiting recently acquired longs. These will have been losses to MM based on the fact that the average price long will have been in the low 80’s and as a general rule of thumb the “clever money” tends not to sit on losses and especially considering the aforementioned point that CTZ23 has broken trendline support!
– Between MM, OR and NR they now hold a net long of 14,069 contracts. Thanks as always to our friends at IAG for pictorial evidence of the fact!
– The one day delayed USA export sales report can be accessed by clicking on the link below.
– We had not intended to write a weekend report but in light of the impulsive nature of Friday’s move EAP wished to alert readers of what to expect next!
Next week is likely to be another busy one with the Chinese markets reopening and the USDA’s Planted Average report on Friday.


Our efforts remain solely on new crop Z23 which has traded between 77.56 and 86.98 so far this calendar year. EAP suggest this contract is fully valued in the mid to high 80’s and maintain that end users should only consider a scale down long and/or “on call” fixations from the mid 70’s, to maybe into the 60’s at some point!

Useful links

*Please note that we only share CFTC CTO on weekend reports. 

Written by:

Jo Earlam

Jo Earlam

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