RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Softs

Sugar Breaking Down to New Lows, Again

Posted 07/12/2018 11:14AM CT | Joe Nikruto

This week’s comment finds the sugar market in a familiar technical and fundamental situation.  After dropping about 70 points from where we were before the July 4 holiday, the October sugar futures contract was again consolidating near the lows of the recent move, 11.24.   As of July 3, the fund trader category was short almost 31k contracts.  This leaves plenty of fire power or room for the funds to extend their short positions. Remember, in May of this year the funds were short over 170k contracts. News out of Brazil, highlighted in recent Hightower commentary, shows the use of sugar cane for ethanol is now upwards of 60% in the Center-South region and possibly increasing. This is a supportive factor and not insignificant. The more sugar cane is used for ethanol the less that will be left for sugar production and ultimately less for export. The challenge for sugar bulls is the sizeable global surplus that remains and looks to continue into next year and possibly the next. Technically, the sugar market is oversold. The chart still looks heavy and one could guess that in the October sugar futures contract new lows for the move are likely to happen before a move back to the 18-day moving average, 11.94. Without a new fundamental input, it is difficult to see what might allow for a sustained rally.  The 18-day moving average comes in fully 84 points overhead in the October contract, 11.87.  Sugar is carving out new lows on lower volume and bounces should not surprise. But traders will likely view any move higher as an opportunity to add to profitable positions or enter new short trades.

Sugar Oct ’18 Daily Chart

 Sugar Oct '18 Daily Chart

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Joe Nikruto

Senior Market Strategist
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."
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