Cotton's Friday Fade: What Traders Should Know About This Week's Downside Move

Cotton futures completed Friday’s session in negative territory, with contracts sliding 15 to 30 points as the March contract experienced a weekly loss of 78 points. This pullback represents a classic fade pattern—where initial strength gives way to sustained selling pressure as the week winds down. The broader commodity complex showed mixed signals, with crude oil climbing 47 cents per barrel to settle at $60.14, while the US dollar index gained $0.042 to $98.995.

Institutional Positioning Shifts Lower

According to CFTC data released this week, institutional traders held a net short position of 74,093 cotton contracts and options as of October 28th—a reduction of 7,152 positions from the previous week. This modest decrease in short exposure suggests that despite the downward price action, some managed money accounts have opted to cover portions of their bearish bets. The shift underscores the uncertainty permeating the cotton market, with traders caught between supportive fundamentals and technical selling.

Price Action Across Contract Months

The December 2025 contract settled at 62.13 cents per pound, down 15 points on the session. The March 2026 contract closed at 63.93, also declining 15 points, while the May 2026 contract fell more sharply to 65 cents, off 23 points. This pattern of greater weakness in the front-month contracts is typical during fade scenarios, where near-term positioning adjustments drive disproportionate selling.

Market Indicators Paint a Bearish Picture

The Cotlook A Index declined 10 points Thursday to 74.70 cents per pound, adding downward momentum to the broader price structure. Meanwhile, ICE certified cotton stocks decreased by 4,309 bales on December 4th, with the total inventory sitting at 15,585 bales. The Adjusted World Price was revised upward last week to 51.28 cents per pound, representing a 51-point gain from the prior week—a disconnect that highlights the different price dynamics between U.S. futures and global physical benchmarks. Most notably, the 12/4 online auction from The Seam saw 5,171 bales trade at an average of 58.37 cents per pound, indicating where actual physical supply can be sourced in the current market environment.

What the Fade Tells Us

This type of fade pattern—where prices retreat after initial enthusiasm—often signals distribution by larger players and potential consolidation ahead. Traders monitoring cotton positions should watch whether support holds near current levels or if further downside emerges as the new week begins.