Cotton spent most of the day in the red on good volume as we are consolidating at the 69 level. The USD hit the strongest level since August and looks like it has more upside. This was sparked by better than expected economic growth in the 4th quarter and weighed on the equity and commodity markets. Options expiration next Friday and the NCC acreage estimate for the 10/11 crop should allow cotton to move sideways in the short term.

Open interest keeps falling as specs and index funds reduce long positions as well as commercials lifting shorts. The COT report on page 2 shows more of the same trend that started early this year as funds rebalance commodity positions. Cert stocks are rising and the spread has moved out above full carry. There does not look to be a strong stopper for the H'10 and we may see the market drift lower as H'10 reaches expiration.