New Key Risk Levels in Now-Prompt Mar Sugar Contract

September 19, 2017 8:48AM CDT

Despite the market's gross failure to sustain Fri's "breakout" above 31-Aug's 15.01 high in the now-prompt Mar18 contract, yesterday's sell-off attempt held above Thur's 14.58 corrective low and short-term risk parameter left in the wake of that breakout.  In this regard the intermediate-term trend remains arguably up.  By the same token however the market's position still deep within the middle-half bowels of the past quarter's lateral range maintains higher odds of aimless whipsaw risk typical of such range-center conditions and highlights the importance of identifying tight but objective risk parameters like 14.58.

Sugar 240 min Chart

Sugar Daily Chart

Since early-Jul's bullish divergence in momentum stemmed this year's downtrend, we've dealt with the typical challenge of trying to identify the price action from 28-Jun's low as either a mere corrective/consolidative affair ahead of a resumption of the bear OR that of a broader base/reversal-threat environment.  The weekly log active-continuation chart below shows that this year's price plunge understandably drove market sentiment levels to historically bearish levels typical of major BASE/reversal environments.  Thus far however the market's mere lateral price action shown in the daily log scale chart above looks about as corrective as it gets, warning of at least one more (5th-wave) stage of the plunge.

Indeed, 01-Aug's 15.82 high is only a tic away from the (15.81) 38.2% retrace of Feb-Jun's 20.40 - 13.50 meltdown.  Additionally, the recovery attempt from 16-Aug's 13.77 low has thus far stalled at the (15.19) 0.618 progression of Jun-Aug's preceding 13.50 - 15.82 rally, suggesting the possibility of a (4th-Wave) lateral triangle consolidation that, after further D- and E-wave lateral chop, warns of a (5th-Wave) resumption of the secular bear trend from Sep'16's 24.10 high.  Waning upside momentum would seem to contribute to this bearish count.

Now the last thing we want to get involved with is trying to count waves within a lateral, choppy mess.  This "theoretical" approach rarely works given the wide array of Elliott corrective patterns.  We only reference it because of the acute and compelling Fibonacci relationships cited above and relative to Thur's 14.58 short-term corrective low and risk parameter, the failure below which will tilt the intra-range directional scales lower and raise the odds of an eventual resumption of the secular bear.  In lieu of such sub-14.58 weakness we must prepare for either some other whacky, choppy, lateral, consolidative mess within the 13.50 - 15.82-range before the secular bear resumes OR a major base/reversal count.  But this latter, very bullish count requires a clear break above 01-Aug's 15.82 high and new long-term risk parameter.

These issues considered, a neutral-to-cautiously-bullish policy is advised from current 14.85-area prices with a failure below 14.58 negating this specific call and warranting a move to a neutral/sideline policy ahead of an eventual shift to a cautious bearish policy.

Sugar Weekly Chart

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.