54 BULLETIN 1444, U. S. DEPARTMENT OF AGRICULTURE 
Suppose, for example, a severe storm is approaching the Cotton 
Belt in September, which threatens to damage open cotton and prob- 
ably to overflow important rivers. The short speculators may imme- 
diately try to cover their unprotected positions. In doing so, certain 
others must necessarily sell their long contracts, or go short. The 
long speculators may use the situation as a means of selling out to 
take their profit and thus prevent an advance, but ordinarily the 
price must advance to tempt sufficient sellers to supply the demand. 
If the event turns out to be of minor importance, the reaction from 
the advance comes quickly, and those who bought long will sell out 
and drive the price back down to about where it started. If the 
event really causes loss and deterioration and influences the spinners 
to do an unusual amount of buying, the reaction, when it comes, will 
not depress the price to an amount equal to the rise. If the rains 
prove beneficial rather than destructive and the buyers of spot cotton 
are stimulated to sell a larger volume of hedges on the rise, the price 
may even decline below the original price. 
Sometimes these movements are much more pronounced and of 
longer duration than others. When the Government report was 
released on August 1, 1923, the market advanced about 200 points al- 
most immediately. It continued to advance rather steadily until the 
latter part of September, 1923, when weather conditions seemed to 
indicate an improvement in the crop, rumors of the closing of mills 
began to be heard, and other similar news indicated that the mill 
demand was falling off. The rise in the price, and the height of the 
picking season, stimulated a volume of sales that played an im- 
portant part in the reaction. On their books the speculators who 
had brought the price up had profits, but they had to sell in order 
to realize them. In their process of selling out to collect the profits 
they depressed the price in the latter part of September and the first 
part of October. 
This example illustrates another important point to be observed 
in analyzing the short-term movements. Prior to August 2 there had 
been a marked decline in the price of cotton, probably because of 
bear speculation. A reaction was about due as a result of the efforts 
of the bears to take profits. Thus, what would probably have been 
a temporary reaction was turned into a strong bull movement because 
of unfavorable crop conditions. 
A decline may be the result of profit taking on the part of long 
speculators, a movement of bear speculators selling for a decline, 
lack of interest on the part of mills and exporters, or to the pressure 
of a flood of hedges ; and if it is a rise, it may be due to a movement 
of the bears to cover previous sales, a speculative bull movement, 
increased activity on the part of mill buyers, or the lack of offering 
of spot hedges in the market. 
It is sometimes asserted that the speculator takes off the peaks 
and fills up the troughs in cotton price movements. This may or 
may not be true. The spot interests on the supply side of the market 
try to place their spot hedges at the crests of these movements, for 
declines usually leave them a profit in the " basis." The spot interests 
on the side of demand, the mill buyers, stay out of the market at 
such times and try to get in and make their purchases when the 
movement reaches the trough. The things, then, which are most lia- 
