Yesterday’s market seems to verify Buffett’s famous saying: We are fearful when others are greedy, and we are greedy when others are fearful. After countless torturous days and nights, most commodities have temporarily bottomed out. As for whether there will be a second bottom, although this possibility cannot be ruled out, the probability is becoming smaller and smaller, and cotton is no exception.
When cotton prices bottomed out at the beginning of the year, quite a few people even saw the 8,000 point level, because the macro environment, industrial environment, and consumption environment were indeed very severe, and ICE once fell below 50 cents/pound. For this reason, many people use the data of this period to compare with 2008. They subjectively believe that the crisis caused by this epidemic is much greater than that of 2008, and the commodity price index should see lower prices, especially after crude oil has completed its sharp decline. This must be a serious logical error. Each market development and interpretation will always have its own characteristics.
The epidemic is the main contradiction leading to this market change. Although several months have passed, the global epidemic continues to spread. What is gratifying is that the epidemic in major European countries has gradually been brought under control. Daily The number of confirmed cases has dropped to three digits, and social and economic life is gradually recovering. The number of confirmed cases in countries represented by the United States, Russia, and Brazil remains at a high level. In particular, many countries face the risk of secondary infection, and there are still uncertainties in market economic recovery. However, the author believes that the worst moment of the epidemic has passed because Even if some people continue to be infected, it will not affect the country’s determination and pace of resuming work and production. It is only a matter of time before mankind defeats the virus. Moreover, the Chinese economy, with a population of 1.4 billion, is showing signs of rebound.
In addition, crude oil has gradually stabilized after a round of crazy declines and has already left the critical line of 20 US dollars per barrel. This shows that OPEC’s production cuts have played a big role and the oil price is currently heading towards 40 US dollars. No one can predict when /barrel will arrive, but we can basically determine that the original “golden pit” will only get farther and farther away from us. After the commodity price deviates seriously from its value, a return is always certain. Crude oil is changing from a falling product to a rising product.
At the same time, the macroeconomic environment is gradually improving. According to data from the National Bureau of Statistics, in May, the comprehensive PMI output index was 53.4%, the same as last month, indicating that the production and operations of Chinese enterprises have steadily improved. Among them, the production index was 53.2%, which was 0.5 percentage points lower than the previous month, but it was higher than the critical point, indicating that manufacturing production continued to improve; the new orders index was 50.9%, an increase of 0.7 percentage points from the previous month, and the difference with the production index was 50.9%. reduced.
Of course, this does not mean that commodity prices will skyrocket. Taking cotton as an example, we will face multiple market pressures in the future, and rising prices will not be easy. The author believes that it is difficult for cotton prices to have a trend in the short term. Range fluctuations are a high probability event, and a gradual rise in the bottom is an indisputable fact. Although the future is bright, the road is bumpy. Facing the unpredictable market, it is crucial to stay on track and grasp the rhythm in the volatile market. </p
