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A weaker US dollar and talk of the oversold condition of the market plus some strength in London futures helped support a bounce overnight. July sugar closed moderately lower on the session yesterday but up nearly 40 points from the early lows. Bearish outside market forces of a sharply higher US dollar and sharply lower US equities plus weakness in energy markets helped drive nearby May futures to the lowest level since November 23rd. Other agricultural markets were able to turn higher despite the negative financial market influences, and this helped ease the selling pressures. Good weather for Brazil’s harvest and higher than expected production from Thailand were seen as additional negative forces. India has asked mills to register to allow the export of the 500,000 tonnes of sugar already approved. This news is not unexpected but could lead to further export ahead. Traders expect normal monsoons this year, so there is an expectation for another large crop. Weather seems to have improved for China’s crop, but they are still likely to be a significant importer for the coming year with a production deficit of nearly 2 million tonnes and tight strategic stocks. Only about 5% of US beet plantings have been completed, compared with 33% last year and 18% as the 5-year average. The COT report as of April 12th showed non-commercial and nonreportable traders combined held a net long position of 146,395 contracts, down 27,898 for the week. The long liquidation trend plus the large net long position appears to be a bearish setup, especially with sugar’s move to its lowest level since November.
TODAY’S GUIDANCE: From an oversold condition, we cannot rule out a recovery bounce, but the trend is still down and the market still looks vulnerable to spec liquidation selling.
TODAY’S MARKET IDEAS: July sugar resistance comes in at 23.37 and 23.76 with some support at 22.39 and a further downside objective of 20.69.
Sugar: Recovery Bounce Possible, but Trend Still Down
by Terry Roggensack on April 19, 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!
A weaker US dollar and talk of the oversold condition of the market plus some strength in London futures helped support a bounce overnight. July sugar closed moderately lower on the session yesterday but up nearly 40 points from the early lows. Bearish outside market forces of a sharply higher US dollar and sharply lower US equities plus weakness in energy markets helped drive nearby May futures to the lowest level since November 23rd. Other agricultural markets were able to turn higher despite the negative financial market influences, and this helped ease the selling pressures. Good weather for Brazil’s harvest and higher than expected production from Thailand were seen as additional negative forces. India has asked mills to register to allow the export of the 500,000 tonnes of sugar already approved. This news is not unexpected but could lead to further export ahead. Traders expect normal monsoons this year, so there is an expectation for another large crop. Weather seems to have improved for China’s crop, but they are still likely to be a significant importer for the coming year with a production deficit of nearly 2 million tonnes and tight strategic stocks. Only about 5% of US beet plantings have been completed, compared with 33% last year and 18% as the 5-year average. The COT report as of April 12th showed non-commercial and nonreportable traders combined held a net long position of 146,395 contracts, down 27,898 for the week. The long liquidation trend plus the large net long position appears to be a bearish setup, especially with sugar’s move to its lowest level since November.
TODAY’S GUIDANCE: From an oversold condition, we cannot rule out a recovery bounce, but the trend is still down and the market still looks vulnerable to spec liquidation selling.
TODAY’S MARKET IDEAS: July sugar resistance comes in at 23.37 and 23.76 with some support at 22.39 and a further downside objective of 20.69.
Tags: Softs, Sugar
About Terry Roggensack