So where do we go from here? The market is currently fueled by panic short covering in the March contract and to some degree also in May and July, as bears struggle to keep up with margin calls and increasing margin requirements. We therefore should expect to see at least another limit up or two. Once March has been liquidated, it remains to be seen whether there is still enough fuel in the tank to keep this parabolic move going. While anything is possible in an out-of-control market like this, we anticipate that the May and July shorts will temporarily stop chasing prices, while longs are likely to book some profits, which should lead to a short-term momentum shift and hence a correction. However, since the shorts have just witnessed what can happen to procrastinators, we expect any correction to be relatively shallow, since aggressive short covering will likely be waiting not too far below. As of last week there were still over 2.0 million bales in unfixed on-call sales on May and nearly 4.0 million bales on July, which should provide plenty of support underneath the market.

Eoin Treacy's view Cotton moved limit up in the early part of the session only to close limit down, forming a dramatic key day reversal. This is the third such formation posted at a major rally peak since November. The others were on November 10th and February 3rd. So far none of these have succeeded in marking a medium-term turning point.

Today's roll of the March contract offers an opportunity for those with long positions to book profits or roll forward into the May or later contracts. Contract rolls are often periods of increased volatility so there is potential for a deeper reaction on this occasion. However a sustained move below 180¢ would be required to break the short-term progression of rising reaction lows and question the consistency of this impressive advance.