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Markets eagerly await new Chinese & Indian cotton

Jun '07
Market continues to trade on light volume in a fairly narrow range as many longs are willing to defend the lows and hold out for potential bullish news on Friday. Some estimates are saying that they could cut the acreage as much as 600K acres based on the West Texas late plantings and dryness in the Southeast.

The market was trading lower electronically and proceeded to go 80 lower as the market found support on the lows @ 60.60 where it has bounced from several times this week. The market then found good support from bullish options and locals as we actually made a new high in Z'07 at 62.25.

This uncovered good trade selling in futures and options and with volume of only 16,000 futures and 19,000 options the market fell back into a range between 61.35 and 61.70 on the close. Chinese currency was revalued to 7.6 today as it has steadily depreciated against the dollar in the last several weeks.

Everyone is now focused on the China and Indian new crops as they will be the key to where NY trades in the next several months. These crops seem to be doing well as the third largest crop in the world continues to have some doubts.

We will have a much better feel for NY once the acreage comes back on Friday, but if we do have a cut as big as they are predicting, we may be able to break through the resistance above 62.00. If not, we may test levels under 60 cents and may be able to uncover some more demand scale down.

Technically, the market feels overbought at 71 RSI and may want to take some profits. But many are happy to trade sideways and wait for any possible surprises with the acreage report on Friday.

Most estimates currently are only slightly lower to unchanged. Z'07 tested above 62 cents level and closed lower near 61.70 due to trade selling. Z'07 high of Wednesday session at 62.25 created a new high for its recent move.

Click here to view graphical presentation:


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