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Cotton futures & options see extremely thin trading
Jul '08
Extremely thin trading session on Monday as the estimated volume was only a little over 5,000 contracts in futures and less than 5,000 contracts in options. Overnight session was choppily traded around the unchanged area as traders waited for fresh market news to trade on.

Early options trading was featured by close to 1,300 lots December contract 72/80 put spreads being sold at 465 points. As Chicago market re-opened at unchanged to a little better, cotton continued its slow pace but generally traded to the downside. The official low at 73.75 basis Z'08 came at noon and the settlement was posted at 65 points lower, near low of the day.

It looks like the summer lull keeps dragging along, and trading is not getting much more exciting any time soon. The uncertainties in the market has kept the trading volume low, which in turn fails to create momentum to push market out of the near term sideways trading range. India is reported to have received good amount of rain during the weekend, which will contribute greatly to helping crops do most of the catching up.

As per the traders commitment report, Non commercials further reduced their net long positions in cotton, which is now a mere 3,548 contracts net long in futures and options combined, down a whopping 11,000 contracts from a week before. Commercials have also slightly increased their longs and reduced their shorts.

NYF cotton ended last week with some positive trading days. The higher lows and higher highs, as well as the strong finish at end of each session slightly improved the near term technical outlook. However, it's still lacking good trading volume to back it up. It feels like the market is trying to test out a short term bottom and create a break out indicator of the sideways trading range.

MACD has crossed and RSI is closing on the neutral 50%. We are now at the top of the current trading range, and the range bound is still likely to last into the near future. We'll have to keep our patience in search for a breakout signal.

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