How much longer will sugar futures continue in downtrend?

April 18, 2018 3:41PM CDT

This week’s comment finds the July sugar futures contract slicing into low priced territory we haven’t seen for years. Seven straight weeks of lower prices has the July contract trading an 11 handle with no real technical bottom in sight. I had to consult a weekly continuous chart to find a swing low, 10.50, for reference. With the Fund trader category almost as short as they have been for some time we can be excused as market watchers for thinking the sugar market is due for a bounce.  But this technical over-sold condition has not been enough counter the tremendous fundamental pressure from the abundance of sugar available. Trend-followers could be forced to cover short positions, but the market will have to close above 13.12 for that to happen in the July contract.  11.91, where the July contract is today, vs 13.12 feels far away but really only represents a little more than one full point.  It is possible that a short covering spark could light a fire in sugar, but the market will still have to contend with supply surplus.  It would make for a more interesting comment if we could find a fundamental crosscurrent to hang our hats on.  But, even with my imagination, I am at a loss to locate a significant fundamental change that could turn the sugar market toward bullish footing. This is usually the exact moment where the market will turn.  So, I am eagerly waiting to see what change is in the offing but at this moment the trend is down, really down. Those who have been early in attempting to locate a bottom have been punished. I continue to think options of shorter duration, if you must play from the long side, are the way to position for a bounce. Traders can get long exposure for less risk (though the risk of losing your premium purchased remains), than futures and if you are willing to pay up you can buy some time as well

Sugar Jul '18 Daily Chart

Sugar Jul '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.