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Sugar Needs to Hold Major Uptrend or Long Liquidation Ahead

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sugar-cane-595Sugar prices continue on a roller-coaster ride during August as they had a daily trading range of 80 ticks or larger for a fifth time during the past 3 weeks. October sugar closed sharply lower yesterday after first seeing strong gains, and the sweeping outside day down from a 1 1/2 month high will be seen as a bearish technical development. A huge net spec long position remains problematic for sugar, and the 47 tick rally between the August 16th and 23rd measuring dates could lead to a record-sized position in the next COT report. Given that set-up, the negative turnaround in energy and precious metals markets gave plenty of encouragement for long liquidation and profit-taking. In addition, there were ideas that traders have overreacted to rain over Brazil’s Center-South region during the second half of August which might slow down their cane harvesting and crushing. There have been rumors that India’s weather office may revise their monsoon forecast to “normal”, which would imply that rainfall will come in no better than 5% above average. If true, this will make it increasingly difficult for their upcoming sugar crop to improve upon current forecasts of 23.0 to 23.5 million tonnes.

TODAY’S MARKET IDEAS: Near-term resistance for October sugar is at 20.71 with support at 19.83. A move under the key uptrend channel which comes in today at 19.66 and tomorrow at 19.71 could sour the technical outlook and open the door for a more significant long liquidation sell-off.

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