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ECOM daily cotton markets recap

May '07
Some profit taking on light volume as the market traded in a narrow 100 pt. trading range. The day was looking higher electronically prior to the open, but quickly found some selling as locals did some short covering and were able to push the market back to 49.80 and 54.80 before support came into the market.

The market was able to hold the weekly low at 49.70 and still looks like it has the upside momentum but it will find resistance at the week's high of 50.75 and even more at 51.00 which would represent an 1100 pt spread on cotton redeemed last week.

Volume was light at an estimate of only 8,000 futures and 8,000 options, while the N/Z spread widened as far out as 500 pts. The big surprise today was the large swing in the spec hedge position from 4.9% short last week to today's level of 2.6% long!

This would represent a reversal of over 15,000 contracts from last week and helps explain the strong 400 pt rally in NY from last Monday's lows at 46.81. We are now near 4-week highs and it looks like the specs are committed to pushing the market higher and we will have to wait to see how much upside trade selling is left to determine how far this redemption rally can go.

The loan numbers are still being estimated to remain between 3-5 million bales and this will give us a better idea of the scale up selling pressure as the specs continue to add to their long position.

Technically, the market still shows to be in an upward trading channel as this was the first down day since we gapped up a week ago. However, the candlestick pattern today does show the open and high at the same level which did create a hangman sell signal.

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