Short Covering or Technical Weakness in Sugar?

February 9, 2018 10:02AM CST

This week’s comment finds a sugar market consolidating and switching between wire service reports of large supply and large fund short position.  The ‘risk off’ mentality and severe testing of trend followers, as outside markets react to the 10% correction underway in the stock market, may ironically be good for the March sugar futures.  The large short position held by commodity fund traders could be cannibalized as risk managers help traders under duress find profitable positions to offset in order to fund positions that are underwater. The Hightower group has done a great job of highlighting the possibility that South American producers could continue to shift from sugar to ethanol thereby reducing the supply of exportable sugar from one of the largest producing regions of the globe.  This is one bullish fundamental the market has been able to hang a hat on as we have worked higher but has faded as the crude oil market has also come under pressure. The March contract has done a good job of stabilizing and trying to retrace almost half of the recent move to new lows.  Still, with the March contract unable to close above the 50-day moving average, currently coming in near 14.17, this places some importance on holding the 18-day moving average, 13.48, at the time of this writing.  If the March sugar futures demonstrate an inability to close over the 50 or hold the 18 that would signal the price action from the last two weeks is merely consolidation and new lows are likely.

Sugar Mar '18 Daily Chart


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

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.