Softs

Sugar Carves Out New Low to Set Stage for Lower Range

Posted 03/07/2018 3:15PM CTJoe Nikruto

This week’s comment finds the May sugar futures carving out new lows for the move in convincing fashion. After the move to new lows last week, the May contract reached 12.84.  The immediate way the market rallied back to a high of 13.80 suggested there was an argument for a bottoming sugar market.  A quick look at the chart below shows that argument has been weakened to say the least. May sugar closed at 12.82 and traded as low at 12.76 effectively putting a lid on any talk of a market bottom for now. Huge volume, over 100k contracts, and new lows for the move can be countered by pointing out the massive fund short position and oversold technicals but not really. Right now, the chart is telling us all we need to know. The global over-supply situation is forcing the market to find a new, lower equilibrium price.  How far down is that price? How much has sugar been held up by crude oil strength and long-term investment/inflation hedge ideas?  The sugar markets 13.00 to 15.00 range for the last year has not been enough to discourage production.  For many traders it would be tempting to try and catch this falling knife.  A short covering bounce could put the market back near 14.00. I just can’t see what could inspire the funds to cover their short positions at this time. 

Sugar May ’18 Daily Chart

sugar_may18_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."