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Sugar’s Falling Knife Becomes Upside Spike?

Posted 09/13/2019 7:41AM CT | Joe Nikruto

This week’s comment finds sugar again carving out new lows for the move. The March ’20 contract has traded below 12.00 at the time of this writing and it is difficult to see what might halt the decline. Near- term supplies are ample, and talk of 2020 production deficits are falling on deaf ears so far.  It doesn’t take much imagination to see sugar continuing to have trouble finding support. In recent years, sugar has found support at these levels and at this size of market participant position. The fund trader short position is record large and the funds have shown a propensity to cycle out of positions when they reach this level, moving the market to the upside.

 Wire services and commentators continue to pitch next year’s deficit projections. If production declines do happen then higher prices will be in order. Until then, the market must contend with abundant upfront supply and a technical picture with no lower boundary. Trend follower stops are almost a full 100 points overheard. For March sugar, the 18-day moving average comes in at 12.23 and the 50-day at 12.70. Don’t expect the March sugar futures contract will require a real fundamental to turn and head for the moving averages. Positioning for a move to the 50-day moving average, 12.70 in the March contract, with shorter timeframe options could be a lower-risk way to play.

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."