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Cotton futures ended on Monday near a 3-year low for the second session running on investor sales, but the market trimmed its losses on consumer buying and signs that it was heavily oversold and due for a recovery, brokers said. "Nobody's got any confidence in the market," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.
The euro gained as investors speculated that new action may be in the works to address the debt crisis and keep Greece from leaving the euro zone.The now benchmark December cotton contract on ICE Futures US fell 0.55 cent, or 0.8 percent, to close at 67.06 cents per lb, dealing between 64.61 and 67.95 cents. It was the lowest close for the third position cotton contract since early October 2009, Thomson Reuters data showed.
Spot July cotton eased 0.06 cent to finish at 68.53 cents a lb, moving from 66.10 to 69.06 cents. The 14-day relative strength index reading of the cotton market stood around 21, from the previous reading of 22. A reading of 30 or lower means the market is oversold and one of 70 or above indicates a market is overbought. "We had fallen so far so fast we should be entitled to a small bounce," Stevens said. Analysts said that at the day's low, cotton futures derived some support from possible mill buying in the market.
Open interest in the cotton market, an indicator of investor interest, amounted to 202,864 lots as of June 1, the loftiest since February 10, 2011, when open interest was at 220,096 lots, the ICE data showed. "The rise in open interest as the market is going down shows investors are adding to short positions in cotton," a dealer said, adding this means many are expecting cotton prices to weaken further in the weeks ahead. Volume on Monday reached almost 36,000 lots, almost 50 percent more than the 30-day norm, Thomson Reuters data showed.

Copyright Reuters, 2012

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