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How much longer will sugar futures continue in downtrend?

Posted 04/18/2018 3:41PM CT | Joe Nikruto

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

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."