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Cotton market looks bearish
14
Mar '08
The cotton market took a much deserved breather today as the volume came down to somewhat normal levels with only 20,000 futures and 50,000 options.

The market opened higher overnight, but gradually came off under bearish options and weak export sales that weighed on the market. We did manage to find support under 81.00 cents and held up better than yesterday by only going 150 pts lower compared to limit down.

Wheat and grains opened higher and tested the high from yesterday before coming off near the close which also weighed on cotton. Technically we are at new highs in wheat and corn, but soybeans have come off significantly from the 1570 high, but did close up on the day.

However, the fundamental picture for cotton is getting worse considering the inflating stocks to use ratio near 50% and the lack of demand looks like this downside correction is not over yet. The stock market managed to close firm as we get closer to the FED announcement next week to possibly continue cutting interest rates.

Export sales including Pima still were not able to break 100k and we shipped the same 4 week average 200k which would keep us from making the USDA target even after revisions earlier this week. With cotton at these levels, we also are hearing about more acres going to cotton and we still have the technical island reversal pattern hanging over the market.

Technically, the market is a real roller coaster and the fireworks don't look like they are going to stop anytime soon. However, if anything the last several sessions may have set up some extreme limits where we could trade short term. Currently we have a very bearish fundamental picture, but there seems to still be good spec and hedge fund buying which we found today.

The upside may continue to run into trade scale up selling as the trade try to limit downside exposure, as we are currently caught between two gaps at 75.12-75.28 and 83.75-85.28.

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