This week’s comment finds sugar contracts, both May and July, chopping higher into breakout territory.  With sugar camped out squarely in the technical middle ground of the range established in late Feb and early March it seems like a move in either direction swings the chart picture from bullish one day and to bearish the next. Fundamentally, today’s Hightower comment highlights what I believe to be the dominant fundamental at this moment. RBOB futures continue to climb. Fuel prices in Brazil provide favorable margin for processors converting cane to ethanol. This conversion to fuel of cane that would otherwise be turned into sugar, according to Hightower, can result in a sugar market deficit for 2019/2020. 

I continue to have doubts and will be watching the numbers closely but also don’t see the merit in fighting the chart.  The commodity trading funds hold a sizeable short position in sugar, much like corn, and it isn’t going to take much in the way of a technical move to get them to cover that short position. An upside violation of the 13.10 level in May or 13.28 in July, a mere 30 points from where the market is now will cause speculative funds to begin to cover short positions.  Is there fundamental justification for a move higher? That remains to be seen. Point is, there is enough kindling here for a fire.  The July contract has rallied above the short and intermediate- term moving averages. There is resistance at 13.03 and participants are switching out of May contracts into July. With so much of the trade activity being rolling of contracts it is difficult to assign much directional weight to what I see on the chart. Be nimble.  There are moves to catch for traders with a plan. It just doesn’t make sense to get locked into a position here.

Sugar Jul ’19 Daily Chart

Sugar Jul '19 Daily Chart

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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."