This week’s comment finds the May sugar futures contract under pressure. After dropping out of the bottom of the channel at the end of February the May contract consolidated and then began its dive again. Shedding almost 150 points earlier this week, sugar futures are now squarely back below the 50 day moving average, 20.06. Wire services point to a lack of bullish news to feed the commodity trading funds who are heading for the exits in a mad rush. This combined with the technical damage that has been done has brought the open interest in sugar futures down over 200k contracts in the last 4 weeks. Recent headlines in the financial press speak of a large physical commodity trading concern that has recently been stockpiling sugar by taking delivery of futures contracts. Ironically, the headline hit on a day sugar was down 75 points. Technical traders who took profits on the break are looking at the damage done to the chart and hoping for a higher level to short from again. They may get the chance as today’s price action shows May sugar stabilizing just above 18.00 and closing higher on the day at 18.47. 18 day moving average comes in at 19.80 and will likely be an area where technicians look to re-establish shorts. I continue to think that sugar is not as plentiful in terms of what can actually be purchased. Asian buyers wait in the wings looking to fulfill needs not met by domestic production. These fundamentals do not match what we can clearly see on the charts. The ‘Head and Shoulders’ pattern that can be seen on a chart of May sugar futures shows a neckline that comes in near 17.00. Violation of the neckline points to much lower prices for sugar futures. Oftentimes, this topping pattern if it does not resolve with lower prices, and in fact the price of May sugar futures contract continues higher, is a very powerful pattern in itself. Near 18.00 could be a level for aggressive traders to try play for a bounce to 19.00 or better but the chart is heavy. My suspicion is, that should the news flow shift back to bullish, May sugar could find its way back 20.00 and above very quickly. However, the chart is heavy and the burden of proof is on the bulls at this time.