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Cotton market expects to gain few points
04
Mar '08
Ironically our first 100% electronic day did not waste anytime and was already locked up across the board in the early morning. We have been at these lofty heights only twice in the last 10 years and both times the stay was short lived. However, this time there seems to be a different driver behind the wheel and this guy does not look like he will be slowing down anytime soon.

We actually traded between 5-6 cents higher than the limit synthetically with Z'08 reaching above 95 cents and the spot month K'08 having a 9 on it! Futures volume was modest with only 20,000 contracts due to the market being locked up the limit, but options made up some of the slack with 100,000 contracts!

Open interest has broken 300,000 contracts and set a new record high, but the spec long position actually came down to only 22.7%.from 28.6% last week. Some of that was related to the higher open interest, but it also shows the commercial accounts are having to lift hedges in order to avoid rising margin calls.

Along with strong overnight prices in energy, metals and the grains, cotton had very few sellers as we are already playing catch up with the overbought commodity complex. The only difference tomorrow in cotton will be an expanded 400 point limit since the two largest open interest contracts closed above 84 cents.

The market has entered a period with all buyers and no sellers as we have shattered any type of nearby technical resistance and are trading in new territory. The upside momentum continues higher and we do not see a jump off point unless grains and the rest of the commodity complex takes a breather.

After the stock market closed weak again today and we continue to see rising signs of inflation and signals of a weak U.S. economy, there is no doubt the commodity complex will be an attractive market to invest money which should continue to fuel this rally.

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