S-T Failure Stems Sugar Bull; Premature to Conclude Top | RJO Futures

October 20, 2016 3:24AM CDT

Overnight's failure below the past 2-1/2-weeks' 22.83-to-22.52-range support and our 22.52 short-term risk parameter confirms a bearish divergence in momentum that exposes at least the intermediate-term trends as down.  Given its scope, this former 22.83-to-22.52 support range would now be expected to hold as new resistance IF something bigger is brewing to the downside.  Per such and as a result of today's resumed weakness, we believe yesterday's 23.10 very short-term high can be used as a tight but effective risk parameter from which any non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.

Sugar 240 min

Sugar Daily

Given the magnitude of the secular uptrend shown in the weekly and monthly log scale charts below, today's piddle, short-term mo failure below 22.52 is grossly insufficient to be considered anything more than a slightly larger-degree correction within the still-unfolding major bull.  Commensurately larger-degree weakness below 01-Sep's 20.10 next larger-degree corrective low and key risk parameter remains required to, in fact, break the major uptrend from Sep'15's 12.05 low.  And a ton of former resistance around the 21.20-area from late-Jun until mid-Sep stands between spot and that 20.10 risk parameter.

If our bull market correction suspicions are to prove correct, a recovery above an admittedly very short-term risk parameter at 23.10 will be first evidence of such and provide a very favorable risk/reward opportunity from which shorter-term traders with tighter risk profiles can switch back around to the bull side.

Sugar Weekly

Historically extreme bullish sentiment indicated by our proprietary RJO Bullish Sentiment Index is obvious and understandable in both the weekly log chart above and monthly log chart below.  Such frothy bullish exposure by the Managed Money contingent is typical of major PEAK/reversal conditions.  As always however, we remind traders that sentiment is not an applicable technical tool in the absence of a confirmed bearish divergence in momentum of a SCALE SUFFICIENT to break the major uptrend.  Overnight's failure below a short-term corrective low like 22.52 is NOT sufficient in this scale regard.  Indeed, our RJO BSI has AVERAGED 96% since early-Jun while the bull tacked on another 20%, so frothy sentiment can stay frothy indefinitely until the market breaks the uptrend with a confirmed mo failure.

But this doesn't mean we're ignoring what could be the proverbial walking before any bear/reversal runs to the downside.  Rather, all we ask of the bear is that it now PROVE it by sustaining impulsive behavior down below a corrective high like 23.10 .  If it can't, then odds will swing back to a bullish count that contends that the sell-off attempt from 29-Sep's 24.10 high is a corrective/consolidative affair ahead of a resumption of the major uptrend that preceded it.

These issues considered, shorter-term traders have been advised to move to a neutral/sideline position in order to circumvent the depths unknown of a correction or reversal lower.  Strength above 23.10 is required to threaten this call, render the relapse from 24.10 a correction and re-expose the major uptrend.  Longer-term players are advised to pare bullish exposure to more conservative levels and still required commensurately larger-degree weakness below 20.10 to jettison the position altogether.  In lieu of a recovery above 23.10 further and steeper losses back to the lowe-21-handle-area resistance-turned-support should not surprise.

Sugar Monthly


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