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Cotton: Will The Winning Streak Continue?
I've said it once, and I'll say it until I'm blue in face: Looking to outside factors for "cues" on where a financial market will move is like using a blindfolded crossing guard to direct traffic. The motion to step off the curb appears right as a speeding car comes zooming by. Then, the signal to "STOP" comes right as the street is clear and safe for walking.
But don't take my word for it. Simply consider these recent news items regarding the future prospects in Cotton:
Speculation:
- October 20: "Cotton Futures Slide In Correction, Funds Sell." STOP
- October 21: "Cotton Futures Ends Stronger As Fund Buying Fuels Gains." GO
Weather:
- October 19: "US cotton fell as... late-day weather forecasts showed a different course" than an earlier, "damaging frontal system." STOP
- October 20: "Cotton Futures Consolidate Higher, Rain Forecasts Supportive." GO
- October 21: "Cotton Slides On Rain Delays. The weather news has shifted -- it might be drier over the weekend and could allow for some harvest." STOP AGAIN
Outside Markets:
- October 20: "Any kind of weakness in equities and cotton ought to fall back." STOP
- October 21: "Cotton Futures shrugged off the typically bearish influence of the stronger U.S. dollar and weaker equities." GO ANYWAY
"Fundamentally"-based "explanations" of market action change on a dime, because mostly all they do is retrofit the news to "explain" what's already happened. You don't want to be caught in the middle. Fortunately, there's an alternative: A way to be steered in the right direction without the erratic starts and stops: EWI's Daily Futures Junctures.
Right now, the October 21 Daily Futures Junctures identifies a major, trend-defining pattern at large in Cotton's prices: A contracting triangle. This is a sideways moving structure labeled A-B-C-D-E, with a 3-3-3-3-3 subdivision. In a "regular" contracting triangle, wave B does not exceed the start of wave A. And, in a "running" triangle, wave B does surpass the start of wave A.
ALL triangles occur in a position prior to the final actionary wave of one larger degree, i.e. as wave 4 in an impulse, or wave B of an A-B-C. In the former case, wave 5 usually results in a short, swift move out of the triangle called a "thrust."
To see the contracting triangle at work in real time, the October 21 Daily Futures Junctures presents following close-up of Cotton prices since the start of the year.