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Pressure remains squarely on May & July contracts

Apr '07
After Friday's option expiration and the idea that some strikes were being protected during it's session it remained an interest as to which direction the market would travel. The electronic session gave nothing away though, tracking close to unchanged mostly this morning.

After a largely unchanged open outcry beginning, pressure soon began to be exerted onto the May and July contracts, with one of the major merchants in particularly being a large put buyer in July. Early on this group bought over 1000 of the July 53/54 bear fences, and through the course of the session they accumulated a grand total of over 3,400 July puts, mostly as a function of bear fence buying.

Nonetheless this pressure, combining with fund sell stops placed under the 51.00 area were enough to drop the market to it's knees, free falling through 51.00 and finally down to some more profound commercial support around the 50.00 cent area. May / July whipped around today, with the bulk of the index fund rolling now completed, and it traded in a broad range of 150-200 points July premium, settling around 165.

Pressure remained squarely on the May and July contracts throughout the session, though there was further erosion in the December contract which could actually reflect the frontal pressure as much as it could the slow start to the corn plantings in the delta.

Estimated volume was expectedly large at 50,837 lots. Tomorrow's spec hedge report will likely document a reversal in the spec position from net long to net short. The last 3 cents down in the May has seen a lot of position reversing from the funds, who are struggling to catch any trends in cotton of late, such has been the range bound nature of the market.

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