COTTON PRICES AND MARKETS 49 
cotton to deliver against it ; when he begins to buy back, he may raise 
the price about as much as his selling pushed it down. If he has mis- 
judged fundamental demand and supply factors, however, the effect 
may not be equal in both cases. Intensive buying of contracts by 
an individual or group may push the price up, or selling of a like 
nature may push it down, but the speculator must sell as many con- 
tracts as he buys, or buy as many as he sells, thus exactly negating 
himself, unless he is able to anticipate coming marketing conditions 
and, even more important, estimate how the mass opinion of the 
market regarding them will be expressed in terms of price. 
Since no buyer wishes to buy at a price greater than the true value, 
or vice versa, and since the true value is ultimately determined by the 
intensity of demand as related to supply, all information concerning 
these two market factors is immediately evaluated by the market and 
translated into terms of price. Information indicating an increased 
demand or diminished supply is bullish, since it tends to increase 
price; conversely, information indicating decreased demand or in- 
crease supply is bearish since it tends to decrease price and favor 
bear operations. 
The market news may carry such expressions as, " the market is 
short " or " oversold," or " the market is long " or " overbought." 
Obviously this does not refer to the number of outstanding contracts 
on either side for they must be equal. The statement that the market 
is oversold means that a large percentage of the contracts outstand- 
ing have been sold by speculators rather than by hedgers. An over- 
bought market is one in which the speculators hold a large volume of 
the contracts. When the speculators who have sold short, or bought 
long, buy back or sell out, as the case may be, they automatically 
cancel out of their operations the effects of further price movements, 
since what is lost on the sale is gained on the purchase. This is 
" covering." " Covering " usually means the purchase of something 
previously sold. 
The forces of demand and supply exert their influence through the 
" spot market " and the " futures market." 
PRICE MOVEMENTS AND THEIR CAUSES 
Three price movements are distinguishable in the marketing of 
cotton: (1) The general trend of prices owing to changes in the gen- 
eral level of prices of all commodities, (2) the gradual change in the 
relation of the price of cotton to prices of other commodities in ad- 
justing to increasing uses for cotton and improved methods of pro- 
ducing and manufacturing, and (3) shorter fluctuations which may 
be attributed to three causes: (a) The annual movement caused by 
changes in supply, (b) the changes caused by changes in business 
conditions — demand, and (c) the short-time movements caused by 
the technical position of the buyers and sellers in the market or to 
other causes. 
The general level of prices changes from one period to another 
and explains a large part of the change in price of a commodity 
from one period to another. In 1896, for instance, the price of 
cotton was 7.9 cents per pound but at that was only 4 points 
less than the general average of all prices or, based on 1913 
