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The technical action in sugar is impressive, and the market is back up to the level seen in Mid-April, with some concerns for Brazilian supply and ideas that the short-term demand is strong. However, we continue to believe that the big picture set-up for the coming season is bearish. July sugar put in highs early on Friday with another rally in London, and the market managed to hold onto most of the gains during the trading session. Fund buyers were active again to push the market to the highs late in the trading day. The rally pushed the market up to its highest level since April 13th, and the market has closed higher in 7 of the past 8 trading sessions. In addition, open interest has moved higher during this time frame, which is a positive factor. There is no question that the technical action is positive, but indicators are now showing an overbought condition. A large trade house from London believes that the world faces a production surplus of more than 10 million tonnes for the 2011/12 season. They assume a normal, 2% rise in consumption, but with high prices last year, production is expected to expand dramatically. If realized, this would be a massive surplus to absorb, and lower prices might be necessary. The Commitments of Traders reports as of May 31st showed non-commercial traders were net long 117,989 contracts, an increase of 2,080 contracts for the week. Non-commercial and nonreportable traders combined held a net long position of 120,061 contracts, up 12,383 contracts for the week. The buying trend is a short term positive force, but speculators hold a large net long in sugar, and the market appears vulnerable to increased selling if support levels are violated. Commodity index traders held a net long position of 195,966 contracts.
TODAY’S GUIDANCE: The sugar market appears to be poised for increased pressures from the anticipated supply flow this year, but aggressive fund positioning for June in a number of agricultural markets is providing solid support. Once this buying is absorbed, sugar may have a difficult time in rationalizing the higher price level.
TODAY’S MARKET IDEAS: Resistance for July sugar comes in at 23.97, and it will take a close above this level to assume a resumption of the uptrend. If so, 25.07 would become next key resistance, which is a 50% correction of the February to May rally. Watch for technical sign of a top soon.
Sugar: Brazil Supply Concerns; May be Reaching a Technical Top
by Terry Roggensack on June 6, 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!
The technical action in sugar is impressive, and the market is back up to the level seen in Mid-April, with some concerns for Brazilian supply and ideas that the short-term demand is strong. However, we continue to believe that the big picture set-up for the coming season is bearish. July sugar put in highs early on Friday with another rally in London, and the market managed to hold onto most of the gains during the trading session. Fund buyers were active again to push the market to the highs late in the trading day. The rally pushed the market up to its highest level since April 13th, and the market has closed higher in 7 of the past 8 trading sessions. In addition, open interest has moved higher during this time frame, which is a positive factor. There is no question that the technical action is positive, but indicators are now showing an overbought condition. A large trade house from London believes that the world faces a production surplus of more than 10 million tonnes for the 2011/12 season. They assume a normal, 2% rise in consumption, but with high prices last year, production is expected to expand dramatically. If realized, this would be a massive surplus to absorb, and lower prices might be necessary. The Commitments of Traders reports as of May 31st showed non-commercial traders were net long 117,989 contracts, an increase of 2,080 contracts for the week. Non-commercial and nonreportable traders combined held a net long position of 120,061 contracts, up 12,383 contracts for the week. The buying trend is a short term positive force, but speculators hold a large net long in sugar, and the market appears vulnerable to increased selling if support levels are violated. Commodity index traders held a net long position of 195,966 contracts.
TODAY’S GUIDANCE: The sugar market appears to be poised for increased pressures from the anticipated supply flow this year, but aggressive fund positioning for June in a number of agricultural markets is providing solid support. Once this buying is absorbed, sugar may have a difficult time in rationalizing the higher price level.
TODAY’S MARKET IDEAS: Resistance for July sugar comes in at 23.97, and it will take a close above this level to assume a resumption of the uptrend. If so, 25.07 would become next key resistance, which is a 50% correction of the February to May rally. Watch for technical sign of a top soon.
Tags: Softs, Sugar
About Terry Roggensack