This week’s comment finds the October futures market with murky fundamentals.  The technical picture leaves me thinking this October contract could be at a crossroads.  It is likely that one way or another we won’t be seeing the current price level for much longer.  Hightower group suggests that if the lows do not hold this market could move into the 12’s quickly.   What one can see clearly looking at the COT charts is the commodity trading funds appear to be as a short as they have been in five years. And that’s because that is only as far back as the COT chart I had handy goes back.  It is likely we would need to see either more churn here at these price levels or upside extension that would allow price levels to be surmounted.  Violation of upside price targets will force funds to take profits and leave those contracts available to be resold should the market continue to erode. Awkward to say that the market would have to go higher to go lower but that could be exactly where we stand. At this point we have a rough ‘cup with handle’ pattern on the chart. The October contract is attempting to hold the 18 day moving average, 13.48 but the recent lows, 12.74 lurk nearby. I would be surprised to see this market make new lows quickly and easily.  That doesn’t mean it can’t happen. Whatever side of the coin you happen to land on the October contract could make for smart trading. If we hold the 18 day and start back toward the 50 day moving average, 14.67, long calls either out-right or via spreads will be the place to be. The October options don’t expire until September 15 so they offer plenty of time as well. 

Oct ’17 Sugar Daily Chart

Sugar 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."