NY futures continued their slide this week, as March dropped another 127 points to close at 63.78 cents, while December '08 lost just 65 points to close at 71.60 cents.
These losses all occurred last Friday, when the March contract violated a six-month uptrend line dating back to May 15th, which prompted some heavy selling from the spec sector.
One particular fund apparently lead the charge by buying well over 5000 March 68 puts, which was possibly done in an effort to protect an existing futures long position.
Since these puts were deep in the money, they equated to some 4'000 contracts of selling pressure and this was enough to force the market to its knees.
Since then the market has been trying to build a base and has successfully defended the 63.00 cents level on several occasions.
Encouraging for the bulls in this regard is that the downside momentum has been waning, with daily trading volume contracting to a fraction of what has been seen in recent weeks and open interest holding more or less steady. This kind of action suggests that this latest round of liquidation may have run its course, at least for now.
At the same time there was a pickup in export activity since last Friday, as both mills and merchants took advantage of this price break to transact some business. However, differentiation must be made between cotton that is held outside the loan, consisting mostly of old crop stocks, and new crop supplies that are in the loan.
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