Cotton stayed in line with the trend lower and broke support at 68.50 to reach 16 week lows. Volume was good again as specs sell into scale down trade buying. Fundamentally, the demand has been good but based on the bigger picture, commodities and equities have been under pressure since early Jan and may have further downside to come. Looking at the Z'10 chart on page 2, we can see the technicals are showing we broke a key support area that could lead to further weakness.

The spec hedge report was unchanged at 12.8% long so specs still have room to sell into the technical weakness. The spread has widened to full carry between H/K and cert stocks are ready to break 500k. With Chinese New Year coming quickly, demand may struggle as most mills are now covered for nearby and could wait to see if the market can come down further.