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Ideas that Brazil’s main harvest season is set to begin soon have helped keep a lid on the market, but outside market forces are positive today, and higher gold and energy markets may help support. Talk emanating from China’s Central Planning Meetings that they will increase the size of their meat and sugar reserves could be seen as a positive development. China has a production deficit of near 2 million tonnes of sugar, so if reserves are going to be built, they will need to import more than 2 million tonnes this season. May sugar closed 71 lower on the session on Friday, as traders were active sellers. This was thought to be liquidation of long positions. There was a general sense that many investors where shifting their assets away from agricultural markets and over to energy and metal markets last week, as investors saw increased risks to high-priced agricultural markets “if” energy prices were to continue to push higher and harm growth prospects in emerging markets. However, sugar has a direct link to energy, and higher gasoline prices might spark increased demand for ethanol. Traders await the upcoming harvest in Brazil. The market managed to inch out a new high for the move to trade at its highest level since February 10th on Friday before pushing lower. May sugar closed 114 higher on the week. The Commitments of Traders reports as of March 1st showed non-Commercial traders were net long 163,949 contracts, up 4,198 contracts for the week. Commodity index traders held a net long position of 169,159 contracts, an increase of 2,840 contracts for the week. The buying trend of the fund traders is a positive force, but speculators still hold a large net long position, which leaves the market vulnerable to selling if support levels are violated. Index fund traders have been a net buyer for the past several weeks, but their net long position is still well short of their record of 392,740 contracts.
TODAY’S GUIDANCE: A turn higher in open interest would be seen as positive to technical traders, as the recent pop off of the lows has come with declining open interest. While trend-following funds may be reducing their net long, index fund traders appear to be more active buyers. Outside market forces look positive today.
TODAY’S MARKET IDEAS: May sugar support levels emerge at 29.29 and 28.83 with 30.74 as key resistance. It will take a close above resistance to open the door for another test of the early February highs. October sugar support is at 25.53 and 25.05 with 27.57 and maybe 29.12 as upside targets.
Sugar: Higher Open Interest Would be Technically Positive; Positive Outside Markets
by Terry Roggensack on March 7, 2011
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
Ideas that Brazil’s main harvest season is set to begin soon have helped keep a lid on the market, but outside market forces are positive today, and higher gold and energy markets may help support. Talk emanating from China’s Central Planning Meetings that they will increase the size of their meat and sugar reserves could be seen as a positive development. China has a production deficit of near 2 million tonnes of sugar, so if reserves are going to be built, they will need to import more than 2 million tonnes this season. May sugar closed 71 lower on the session on Friday, as traders were active sellers. This was thought to be liquidation of long positions. There was a general sense that many investors where shifting their assets away from agricultural markets and over to energy and metal markets last week, as investors saw increased risks to high-priced agricultural markets “if” energy prices were to continue to push higher and harm growth prospects in emerging markets. However, sugar has a direct link to energy, and higher gasoline prices might spark increased demand for ethanol. Traders await the upcoming harvest in Brazil. The market managed to inch out a new high for the move to trade at its highest level since February 10th on Friday before pushing lower. May sugar closed 114 higher on the week. The Commitments of Traders reports as of March 1st showed non-Commercial traders were net long 163,949 contracts, up 4,198 contracts for the week. Commodity index traders held a net long position of 169,159 contracts, an increase of 2,840 contracts for the week. The buying trend of the fund traders is a positive force, but speculators still hold a large net long position, which leaves the market vulnerable to selling if support levels are violated. Index fund traders have been a net buyer for the past several weeks, but their net long position is still well short of their record of 392,740 contracts.
TODAY’S GUIDANCE: A turn higher in open interest would be seen as positive to technical traders, as the recent pop off of the lows has come with declining open interest. While trend-following funds may be reducing their net long, index fund traders appear to be more active buyers. Outside market forces look positive today.
TODAY’S MARKET IDEAS: May sugar support levels emerge at 29.29 and 28.83 with 30.74 as key resistance. It will take a close above resistance to open the door for another test of the early February highs. October sugar support is at 25.53 and 25.05 with 27.57 and maybe 29.12 as upside targets.
Tags: Softs, Sugar
About Terry Roggensack