NEW YORK (Dow Jones)--Selling from speculative funds drove ICE Futures U.S.
cotton to its lowest levels in 16 weeks Monday as bearish technical cues added
to losses.
March cotton settled down 81 points, or 1.18%, at 68.22 cents a pound.
Cotton bucked typically supportive factors, including the weak dollar and
gains in commodities such as crude and metals. March cotton futures took out
recent lows midday at the 68.83 level and support at 68.50, which triggered
more sales based on preset technical cues.
Commodities markets have been under pressure in the last week as calls from
the Obama administration for tighter financial regulation have acted as an exit
cue to speculative funds, said Keith Brown, principal at Keith Brown & Co. in
Moultrie, Ga.
Speculative traders have no use for the underlying commodity, as opposed to
the producers, merchants, processors and end users that hedge in the futures
market.
Cotton prices are bumping up against lows that analysts expect to hold, they
said.
"I'm looking for prices to get down to 68-68.20 level key support," said Boyd
Cruel, senior softs analyst at Vision Financial Markets in Chicago.
However, futures have fallen significantly in a short time and are due for a
corrective bounce, said John Flanagan, president of Flanagan Trading Corp. in
Fuquay-Varina, N.C.
Analysts also noted traders were selling March futures and buying May in line
with key commodities index rolls this week.
Cotton continues to back up from a rally that peaked at 76.77 cents basis
March on Jan. 4. Prices have fallen steadily as speculators edged out of the
market, though analysts have said continued physical buying from mills adds
underlying support to prices and a bullish tint to cotton fundamentals. The
market rallied as that demand from textile mills came up against
lower-than-expected world production.
ICE daily cotton stocks increased by 1,843 500-pound bales Friday to total
478,343 bales, with 51,086 bales awaiting review, according to exchange data.
ICE cotton open interest--the number of active positions left at the end of
the session--increased by 1,474 positions Friday to total 171,178, according to
the exchange.
Volume was estimated at 23,800 lots. In options, approximately 5,002 calls
and 1,188 puts traded, according to exchange data.
Close Change Range
Mar 68.22 -81 pts 68.20-69.37
May 69.86 -77 pts 69.81-70.90
Dec 70.19 -65 pts 70.07-71.00