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Sweeping Reversal in Sugar from Record Overbought Condition; Weak

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sugar-cane-595The market appears to have put in a major top. Sugar has been one of the best performing major commodities during September and the third quarter of 2016, and along with that has come a net spec long position that has stayed close to a record high of 388,974 contracts reached in late August. The latest COT report released after today’s close will reflect a 170 tick rally (8.3% higher) between the September 13th and 20th measuring dates, which should lead to not only a new record high net spec long position, but also one above 400,000 contracts for the first time ever for an Ag commodity. A close below 22.47 today for March sugar would leave the market with a key weekly reversal; another strong signal that a top is in place. Post-FOMC weakness in the dollar contributed to early bullish sentiment, while expectations of a second sizable global supply deficit in a row during the 2016/17 season continue to provide support. In addition, news of an increase in margins by ICE futures could have caused hedgers to unwind their short positions.

TODAY’S MARKET IDEAS: A negative key reversal and a record high net spec long position is not a good combination. Near-term resistance for March sugar is at 22.88 with 21.99 and 21.54 as close-in support. Don’t rule out a correction back to 19.92.

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