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Oil prices continue to move sideways
Jun '08
Have we reached the top after a 13 cent rally from the lows in N'08, or is this just a consolidation with further upside to come? Oil prices continue to move sideways as grains grind higher, but the general feel for commodities is looking overbought nearby.

If we are unable to break through the upside resistance in oil in the short term, we may see a pull back that could drag cotton and grains back down. The spec long position came down to 1.7 this week from 3.5 last week and the open interest in cotton keeps falling. Volume was average with 32,000 futures and 25,000 options as N'08 open interest fell to 25,000, but take a look at overall open interest on page 2 in attached PDF.

Demand has disappeared as mills were able to cover their nearby needs on the latest break in NY and they are patient to wait for better prices. With V'08 at 77.00 cents, we are at least 5 cents away from putting together any significant new sales. However, the crop uncertainty and digressing conditions should add support to the market on pull backs.

We may be setting up for a short term sideways trading range between 80/82 cents based Z'08 as we get closer to FND on June 24th. Other commodities will be very important to the short term direction for cotton, but the dollar is holding up and the stock market is starting to find support at these levels which will take some attention away from commodities.

Technically, the MACD is crossing higher and RSI has room to gohigher at 62. N'08 set a 9 week high today @ 76.20, but we found very strong scale up trade selling. We are setting up for a seasonal high in the short term as all commodities are testing contract highs or on them.

We are getting some rain in West Texas and if anything the cooler temps this week are helping the 20% of poor and very poor cotton in the dry land areas of Texas. Cotton will continue to follow the other commodities prices higher as the dollar and equity markets struggle.

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