USA : Heavy mill buying continues to exist within 61-62 cent

New York cotton futures limped through their Thursday's close hanging to their technical supported by little more than hope as December traded below its 62 cent long term support. However, the December contract has all but given way to the March contract as the nearby month.
Thus, as long as March contract, with its Thursday's close at 66.48 cents, can hold above the old December support level of 62 cents, then the longer term technical picture of the market can still hold its head above water. While the March contract will likely slip into 62-67 cent trading range, the better odds are that March futures will hold the 64-65 cent level.
In the very short term, as the December contract moves to its notice period, weakness in that trading month could force its price down to 60 cents.
Yet, as stated, it is the March contract that has become the center of attention with respect to mill pricing decisions. The March contract will encounter much difficulty on attempts to push above the 69 cent level and will test its 64 cent support level a number of times.
With the volume of Indian cotton available to the export market, it is conceivable that March futures will slip as low as the 62 cent support level of the expiring December contract.
This week's dip below 62 cents was based on large volumes of outright fund selling as well as fund rolling of long December's to the March contract. Mill fixations and mill buying became very aggressive as December fell to 63 cents and below. It was, in fact, this demand from textile mills that supported December above 61 cents.

Additionally, Thursday's on-call report continued to show a significant imbalance between call sales and call purchases. The high volume of on-call sales suggest that much more buying of futures contracts remains to be done. As mills fix prices on these contracts the effect will likely be to keep prices at and above current levels. That is, futures prices should have very little room to the downside
While heavy mill buying continues to exist within the 61-62 cent trading range, the massive long positions held by funds will trigger sell stops should December futures fall below 61 cents-or the March contract slip below 65 cents.
As open interest has steadily established new record highs along with the significant imbalance between call sales and call purchases, market volatility has become more and more of an issue. Specifically, note Thursday's 150 point trading range and its 145 point sell off.