RJO FuturesCast

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Softs

Sugar is Consolidating in Downtrend

Posted 05/23/2019 3:34PM CT | Joe Nikruto

This week’s comment finds the July sugar contract consolidating after a recent move to new lows. Burdensome India supplies, weakness in the Brazilian Real and according to a Hightower comment on Thursday morning, increased selling due to the move in that currency. Sugar is seeing an upswing in open interest while commodity trading funds and commercial participants are increasing the size of their respective positions. Wednesday, the July sugar contract traded above then closed below the 18-day moving average, virtually negating the influence of the sweeping outside day up/key reversal from the previous session. While this one-day reversal took place on substantial volume, almost 120 thousand contracts, the inability to close above the 18-day is a bearish signal and a hallmark of down-trending markets.  Every day July sugar is unable to close above that 18-day moving average funds will be emboldened to press the short side and increase their positions. I will be watching open interest to see if the trend there continues to be up. If open interest stalls it feels to me like sugar could have a hard time extending the move lower. For now, the trend is down. 13.08 and 12.41, should the July sugar futures rally, are the levels where funds will be forced to the sidelines. While energy markets melted down this week sugar did not follow. This could be a signal that the market has digested the India supply headline and has come as far as it can for now. Treat the 18-day moving average, 11.85, as a line in the sand for risk management purposes if you are trying to press the short side. It feels like sugar could mark time in a range before heading lower.

Sugar Jul ’19 Daily Chart

Sugar Jul '19 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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