Cotton futures were hammered by speculative long liquidation to finish sharply lower Monday and the weak tone of the market may lead to further losses this week, brokers said.
The New York Board of Trade's December cotton contract sank 1.43 cents to settle at 49.36 cents per lb, trading from 49.30 to 50.85 cents. March lost 1.08 to 52.90 cents. The rest fell 0.58 to 1.15 cents.
Sharon Johnson, cotton expert for First Capitol Group in Atlanta, said the market was weighed down by the fact that prices have been up 10 of the last 12 days or so to the point that fibre contracts may have been overbought.
"We've been up an awful lot and we were due for a correction of some nature," she said.
Talk was also circulating in the pit that China may be on the verge of increasing its estimate of that country's cotton harvest for this season.
Last month, the US Agriculture Department raised its forecast of China's cotton harvest in 2006/07 to 29 million (480-lb) bales, up 1.0 million from the preceding month's estimate.
Combined with a sell-off in the benchmark Reuters/Jefferies CRB commodities index, traders said cotton futures were primed for the kind of sell-off seen on Monday.
The fundamental outlook for cotton contracts remains bearish since estimates of global production have been rising while consumption calculations continued to decline.
"We ran (automatic sell order) stops once December hit and got below 50 (cents). There were also some stops at 49.75 and then we finally ran into some support at the lows," a dealer said.
Brokers Flanagan Trading Corp sees resistance in the December contract at 50 and 50.50 cents, with support at 49.30 and 48.75 cents. Floor sources said final volume hit around 20,000 lots, from the previous tally of 15,469 lots. Open interest in the cotton market fell 115 lots to 183,130 lots as of October 27.