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Cotton market finds some scale down trade buying

25
Apr '07
FND fireworks as the market found early support, but fell off quickly to set new contract lows based on bearish options and spec sell stops. Surprisingly, the spec hedge report was not as short as we originally expected it might be. Specs who had been .02% long last week only moved 1% lower to.08% short.

This partly explained the weakness as heavy put buying and call selling triggered sell stops by specs who had room to sell. The market did find some scale down trade buying and friendly options which held the new N'07 contract low @ 50.20. Volume was estimated at 13,000 contracts on the floor, 6,000 electronic and almost 15,000 total in options.

Notices were issued yesterday out of Term commodities for 973 notices as the open interest in May fell to 3,432 contracts.

Looks like we may have a few more left to deliver before last notice day for K'07. The CRB index came under pressure as almost every participant in the index had a lower day except for corn. News about the U.S. plantings were also released yesterday showing the crop only 11% planted compared to 21% last year and 16% for the 5-year average.

The West is off to a better start than usual but Texas seems to be the slowest due to low soil temperature. Still too early to have any concerns over the amount of cotton which has been planted so far. Moving averages are both trending lower, with the 9 day continuing it's divergence away from the 50 day at 51.95 compared to 53.83. Momentum continues negative with the RSI down to 32.64, well and truly in oversold territory.

Any positive action yesterday was broken with another record low driven by spec selling. Will have to hold this level for any chance to move higher. Specs seem to have room to sell weakness and the trade buying has slowed down as we will probably see a much smaller export sales report on Thursday.

ECOMUSA Inc


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