RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

This week’s clear, decisive and impulsive break below 27-Feb’s 19.10 low and support reaffirms and reinforces our longer-term bearish count introduced in 10-Feb’s Trading Strategies Blog calling for a major correction or reversal lower from 06-Feb’s 21.21 high.  As a direct result of this continued weakness the 240-min chart below shows that the market has defined yesterday’s 19.84 high as the latest smaller-degree corrective high and new short-term risk parameter it is now minimally required to recoup to threaten our bearish count.  Former 19.10-area support is considered new near-term resistance ahead of further and possibly severe losses.

Sugar May17 240Min Chart

Sugar May17 Daily Chart

The daily chart above shows the market still reeling from 10-Feb’s unique combination of:

  • a confirmed bearish divergence in momentum from
  • the immediate area around the (21.02) 61.8% retrace of Sep-Dec’s 23.10 – 17.66 decline amidst
  • historically frothy bullish sentiment not seen since Aug 2011.

On the heels of a textbook 5-wave Elliott sequence from Feb’16’s 12.61 low to Sep’16’s 24.10 high on a weekly log scale basis below AND another textbook 5-wave sequence down from Sep’s 23.10 high to 15-Dec’s 17.66 low labeled in the daily chart above, these Feb peak/reversal facts warns of a resumption of Sep-Dec’s initial counter-trend break to eventual and potentially severe losses below Dec’s 17.66 low as part of a MAJOR REVERSAL PROCESS of the entire 2015-16 bull.  If correct, prices in the 16.00-to-13.00-range over the next quarter or two could lie ahead.

Sugar Weekly Chart

The monthly log scale chart below provides an excellent long-term history of sugar prices and what can happen when bullish sentiment gets as extreme and frothy as it did during the second-half of 2016.  The last time this market experienced such gross bullish sentiment and long exposure from the Managed Money contingent was around Feb 2011’s major peak and reversal.  As indicated by our RJO Bullish Sentiment Index, such frothy bullish heights warn of a tremendous vulnerability to lower prices AFTER the market breaks the uptrend with a confirmed bearish divergence in mo.

Such divergences have now occurred on two scales:  first, on a weekly basis in Nov/Dec’16 and secondly on 10-Feb as discussed above an in 10-Feb’s Technical Blog.  Until and unless this market threatens a broader bearish count with proof of strength above at least 19.84 and preferably 06-Feb’s 21.21 high and key risk parameter, traders are urged not to underestimate the extent to which this market might now be vulnerable to further and possibly severe, even relentless losses.

In sum, a full and aggressive bearish policy remains advised with strength above 19.84 required for shorter-term traders to move to the sidelines and longer-term players to pare bearish exposure to more conservative levels.  Ultimately a recovery above 21.21 is required to negate this bearish count entire and warrant covering any remaining bearish balances.  In lieu of such strength further and possibly accelerated losses remain expected.

Sugar Monthly Chart


RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.