RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

This week’s comment on the October sugar futures contract finds a market continuing to press for new lows. On the chart we see yet another weekly low shaping up. Wire services are reminding us that should the “risk off” attitude spread from equities to commodities, sugar is one of the markets that could see dramatic short covering. I’m not too bullish on that idea, as typically commodity trading funds need technical levels to be reached or breached for action to result. For funds to start covering short positions we would likely need to see the October contract trade above 13.93 and 15.55. That is not to say a relief rally isn’t possible as indicators show the market is well oversold. For any sustained rally to take place we would first have to at least close over the 18-day moving average, 16.03. The commodity trading funds are relatively more short than they have been in a long time. Same goes for the commercial trader on the other side of the coin – very long. Interestingly, the commodity trading fund category, where risk is accepted in pursuit of potential profit, is getting shorter on declining open interest. This could point to a downtrend in October sugar futures that is getting tired or beginning to lose momentum. We could place more stock in this idea if the price action on the chart didn’t resemble a hot knife through butter on the way to yet another new weekly low. One thing that did jump out at me from the wires this morning, I think it was the Hightower group pointing to a bank comment about sugar being below the cost of production. Sugar producers, much like cattle feeders will not let a little thing like low prices slow them down. But, sooner or later the economics will assert themselves and prices will have to go back up or at least stop dropping like a rock. Could owning calls be a good idea to take advantage of a relief rally? Looking at the chart, however, makes that seem like a questionable move and even the most aggressive of traders can wait at least until we see a close above the 18-day moving average to make a decision. 

 

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."