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Cotton market struggles to find direction
May '08
Cotton has been trading sideways the last several sessions as the market is struggling to find direction. The grains are also bouncing back and forth in a narrow range and giving little direction to cotton at the moment. Export sales are coming out tomorrow and we are not expecting them to reach last week's record levels.

Good rain in West Texas has softened the market response to the good sales nearby as well as the lack of strength in grains. However, with oil prices hitting new record highs everyday, the trend is still alive for spec money to stay invested in commodities instead of jumping back 100% into stocks.

The USDA S&D report may help break this market out of the current trading pattern as we have been unable to break the trading range set a week ago on April 30th and continue to see little change in open interest.

Inquiries are slowing down as mills seem to be comfortable with the amount of cotton they have committed and we are still trying to get a handle on global consumption with several reports describing a very bearish textile mill picture. Economic growth is under pressure and the mills are struggling with the lack of demand.

NYF cotton prices are overall holding up well considering the bearish fundamentals. More rain has been seen in West Texas, which is a friendly news for the planting season.

Technically, we broke the strong support line at 70 cents in N'08 last week, but have closed above this level two days in a row. The cotton market feels like we are trying to put in a short term low near 69 cents as we have had four continuous inside trading days.

However, the 69 cent level has proved to be a strong support yet again. We are likely to trade sideways and in sync with outside commodities for the nearby trading sessions.

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