RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

This week’s comment finds the May sugar futures contract hemmed in. Bouncing around in a rather tight range bounded by the 50-day and 18-day moving averages sugar appears, yet again, to be poised for a move. With the May contract trading in a roughly 1.75 range since December it feels like I am being convinced by Lucy to try, just one more time, to kick the football. Feelings aside, sugar has recently rallied above, but failed to hold, the 50-day moving average, 12.73. Price action has eroded below trendlines drawn off both the September and January lows. While currently holding above the 18-day moving average, 12.47, the market looks heavy. 12.33 and 12.08 are swing lows that appear to be within shooting distance.

Fundamentally, this morning’s Hightower comment sums up the situation. Lower Brazilian currency, surplus (yet again) for 2018/2019, talk of supply deficit for 2019/2020 and massive use of sugar cane for ethanol vs sugar in Brazil. That last fact may be what the direction of the sugar market hinges on in the near term. If prices for RBOB gasoline can remain high the ethanol margins in Brazil can support aggressive offtake of sugar can for use in fuel.  If energy prices can’t hold, sugar may have difficulty holding here as well. Bottom line, while the jury could be characterized as still out technically, the inability of the May contract to hold above the 50-day moving average is not bullish. Admittedly, it will not take much of a move higher to change the chart picture. But until we see sugar trading above 12.90 the path of least resistance appears to be lower.

Sugar May ’19 Daily Chart

Sugar May '19 Daily Chart

If you would like to learn more about soft futures, please check out our free Fundamental of Softs Futures Guide.

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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."