Softs

Unable to hold upper range, sugar to press for new lows in October contract?

Posted 08/10/2017 3:33PM CTJoe Nikruto

This week’s comment finds the October sugar futures demolishing a rather well defined upward sloping channel and answering all technical questions we had in our last visit.  Is the market bottoming? Is this the beginning of a longer term uptrend?  Will October sugar futures be able to hold and advance above the 50-day moving average? No, no and no.  Global surplus and lackluster demand have conspired to trump short term technical factors and fund trader short covering.  Brazilian harvest is chugging along and globally supplies of sugar should remain ample.  The chart shows a sugar market fully rolling over and taking out two previous levels of support in what appears to be a bid to take out the June low, 12.74.  The fund trader, who recently was on the buy side of the ledger, has decreased their net short positions by about 50k contracts in the last 30 days. As of the last reporting period that short position has been trimmed from about 112k contracts down to about 73k.   My guess is the new COT report will show funds puking up those recently bought contracts and back on the short side again, likely near the 100k level. Traders with more intestinal fortitude and risk capital can continue to view the chart as a cup with handle bottom, albeit one with a very large handle, for about 49 more points until October makes new lows.  As of now the oversold technical condition could lead to a bounce.  The 50-day moving average, 13.95 should now be resistance. I want to be mindful of the possibility that sugar could continue to churn, moving the funds into and out of positions, but for now the chart points lower.

Oct ’17 Sugar Daily Chart

Oct '17 Sugar Daily Chart

Joe Nikruto

Joe Nikruto attended Indiana State University and DePaul University in Chicago with a major concentration in economics. "It was during college that I got a job as a runner at the Chicago Board of Trade. I was immediately hooked," he says.He adds that he also enjoys futures trading because anyone can do it. "Your success depends on how you handle the risk and how much work you are willing to put in. You don't need a big-time Wall Street connection, or a degree from an Ivy League school to get started. Your success largely depends on you and what you put into it." In 1992, he started as a runner and back office clerk for a very large futures commission merchant (FCM). He moved up to pit clerk, then research associate working on the trading floors directly for a grain and livestock concern based in Memphis. He spent time on various trading desks for a large retail FCM and then became Series 3 registered in 1997. He also helped develop an online trading platform and consulted on development and trading of mechanical trading systems. He has always worked to assist his clients with all types of trading-from option strategies and hedging to complicated mechanical trading systems. His advisory background includes Floyd Upperman, McMaster, Walter Bressert, Ken Roberts, Tech Guru, Hightower, Helms and Barry Rosen. As for his involvement with RJO, Nikruto says, "R.J. O'Brien has been in operation for more than 100 years. That is a century of supporting customers. You have to be doing something right for folks who use futures to choose to do business with you for that long."