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Cotton trading remains quiet as NY continues to trade sideways
27
Aug '08
A strong dollar today led to generally lower commodity prices. Crude oil is seeing higher level as hurricane concern draws closer. Overnight ICE opened at a little lower and traded quietly for the early morning session. Prices started to pick up when options morning session opened and some bullish trades came into the pit.

We're still in the range trading mode, which set today's range between 68.26 and 69.94 basis Z'08. Trading was overall quiet as we head into the Labor Day holiday weekend. Today's trading volume was estimated at close to 8,500 contracts in futures and 7,000 contracts in options.

The spec hedge number remained at 0.7% net long, same as a week before. Non commercials have increased both their longs and shorts to 40.5% and 39.8% respectively (please see chart on page 2 in attached PDF). Physical cotton trading has also remained quiet as NY continues to trade sideways.

Crop condition is generally good, but the weather factor is going to play a more interesting role as we head for end of the summer season. As tropical storm Fay is giving different rain effects across the crop regions in southern U.S., hurricane Gustav seems to be heading to Gulf of Mexico.

Technicals turned friendly last week as MACD started to cross higher in cotton made a nice run to the upside. Although volatile, the market is well traded in the range.

We ran through some correction, but buying interest would come through to prevent the market from falling off. Considering the low open interest in cotton and the lack of demand, cotton feels like we may continue in a sideways trading range up to heavy resistance at 72.00.

This will depend on how much the rebound in outside markets can follow through, but the short term upside looks limited and we may see a correction in cotton if we cannot break through 72.00 cents.

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