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Cotton trades flat
Jun '08
Grains opened lower overnight and that did not help cotton which traded flat to lower most of the day. Open interest in N'08 as of this morning was 6,900 contracts, but there does not seem to be a strong taker as the spread was basically unchanged showing little desire for the growing cert stocks.

N/Z'08 spread closed out at 850 points which was more or less the same spread we have been trading since K'08 went off the board. Volume was light today with only 16,000 futures and 8,000 options as cotton continues to follow grains looking for direction.

Spec hedge position increased to 4.5% long today from 1.7% last week which is not surprising considering the reduction in non-commercial shorts last week and the big fall in open interest below 220k. We have the Federal Reserve meeting this week on Wednesday where most people are expecting a hold on rates at 2.0% and this may help to strengthen the dollar going forward.

However, there is plenty of negative financial news coming out on a daily basis which keeps the equity markets on the defensive as well as the dollar. We are building a bit of a sideways trading range as the bottom in Z'08 at 78.50 has held up on two occasions, but we are still seeing good resistance above 82.00.

Technically, the market is looking toppy with several commodity sectors trading at contract highs. The MACD's are turning south recently in several of these sectors as we have been moving sideways and running into strong upside resistance.

Cotton will continue to follow the other commodities prices as the dollar and equity markets struggle, but our market is finding good resistance at these levels and will have to wait and see if it can break through or we eventually go lower.

At the moment, demand is dead, cert stocks are rising and we are seeing a slow down in the commodity index which could set us up for a pull back.

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