The Hightower Report

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.

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 sugar market remains in a minor uptrend, with the rally yesterday challenging the 1-months highs. A positive tilt to the outside markets this morning might provide some underlying support, but sugar seems to have corrected its oversold condition and may turn down at any time. Bullish traders seem to be hoping for wet weather in Brazil or increased demand from China or increased import needs from the EU to help boost prices, but these would be short term influences, and the big picture supply fundamentals remain mostly negative. Weather in Brazil is dry and this might be seen as negative. The EU is expected to decide soon on additional duty-free import tariffs for near 200,000 tonnes. While China demand appears strong this year, there are strong rumors that the government may sell near 300,000 tonnes from reserves near the end of May or early June. July sugar closed sharply higher on the session yesterday and to the highest close since May 18th. A bullish tone for energy markets and surging silver and gold values helped support. Ideas that China’s demand could be strong coupled with some short-covering added to the positive tone. Mexico approved a sugar import quota of 150,000 tonnes until the end of this year. Production has reached 4.98 million tonnes so far this season, up 11.5% from last year. Brazil’s 2nd largest sugar port is believed to have expanded capacity this year, which could mean shorter loading lines. Bangladesh is expected to buy 50,000 tonnes of white sugar on the world market.

TODAY’S GUIDANCE: The International Sugar Organization believes there will be a world production surplus of 3 million tonnes for the 2011/12 season, which would be up from a surplus of 800,000 tonnes for the 2010/11 season. Many private companies have even larger surpluses in their forecast models. Resistance for July sugar comes in at 23.17 and 23.83 with some light support at 22.52 today. Better support is at 21.98.

TODAY’S MARKET IDEAS: Position traders might wait to see the extent of the recovery bounce. We see an eventual move back down to 19.43 but would not rule out a bounce to 23.17 or higher first.

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!

It has been a while since the sugar market showed the type of strength it did yesterday. Traders will be interested in seeing whether there is much demand on this rally, as buyers are aware of higher production coming from Brazil and India and a surprise, record crop from Thailand. The market managed a significant range-up extension yesterday and penetrated a downtrend channel resistance line that was forged off the March-May slide in prices, which was seen as a bullish technical development. Outside market forces look positive today with a turn down in the US dollar and more strength in the metals markets. The number of vessels waiting to load sugar in Brazil has increased, as the harvest has not picked up as much steam as some traders had hoped. A general perception that Brazil’s production may be revised lower due to poor early yields might be adding to the positive tone. Australia is expected to start their 2011 crush season about 4 weeks earlier than normal. The idea that the world production surplus could be significant this season has been a primary negative force for the sugar market. China’s production jumped 53% for April. This pushed January-April production to 7.82 million tonnes, up 1.4% from last year.

TODAY’S GUIDANCE: The market is seeing a recovery bounce from an oversold condition, but for now the fundamentals do not suggest a turn in the trend is imminent. Look for a recovery bounce and not much more.

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 sugar market remains in a steady downtrend, and supportive outside influences have been more than offset by increasing supply on the world market and long liquidation by speculators. The combined spec net long position in the last COT report was still 122,158 contracts but was down from well over 200,000 just a few months ago. India approved 30,000 tonnes of unrestricted sugar exports, which is the first of a total of 500,000 which the government approved on April 19th. India’s production is expected to reach around 25 million tonnes this year, compared with usage of 22-23 million. Thailand’s premiums of cash to futures have slipped to their lowest levels in two months on sluggish demand and a much larger than expected supply from last year’s crop. Thailand officials now expect a record production of 9 million tonnes for the 2010/11 season, up 30% from last year. July sugar closed lower for the third session in a row yesterday, as the market continued to see little benefit from positive outside market forces. The focus is still on a higher supply outlook and sluggish short-term demand. A surge higher in gold and silver and another new low in the US dollar failed to provide support yesterday or overnight. Good weather in Brazil has traders inching up their estimates of Brazil’s sugar production for the coming year. The USDA attache in Brazil pegged the new cane crop at 631 million tonnes, up 2% from last year. Brazil’s weather looks favorable for active harvest over the near-term, with only scattered light storms expected through the weekend.

TODAY’S GUIDANCE: On April 14th, open interest was 636,290 contracts. This has dipped to 597,076, as spec long liquidation selling persists. The short-term technical picture turned more negative with the hook reversal on Monday, and the market looks poised for another move down.

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.

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 market has been in a consolidation mode for the past three weeks and has inched to the higher end of this range in the past few days. While there are plenty of bearish supply/demand forces at work, outside market forces appear to be turning more positive, and we remain concerned that index funds will be more active buyers over the short term. A weakening US dollar, record high gold prices, massive world liquidity, and the strength in the energy sector are all positive forces for sugar. May sugar closed moderately lower on the session yesterday, while October closed just a few points lower on the day. Talk of an improving supply outlook helped to pressure the nearby futures. The market is still inverted due to tight current supply, but traders believe it will eventually dissipate. This has sparked some active bear spreading. Mexico’s sugar production is expected to reach 5.3 million tonnes for the 2010/11 season. Syria is tendering to buy 30,000 tonnes of white sugar. For the first six months of the October/September marketing year, China’s sugar production has reached 9.8 million tonnes, down 5% from last year. Traders believe China will import at least 2 million tonnes in the next year. Friday’s COT reports showed commodity index traders held a net long position of 181,484 contracts, up 10,096 in just one week. The buying trend of the fund traders is a positive short term force. Keep in mind that in May 2008, index funds held a net long of more than 390,000 contracts, so there is a potential for aggressive buying ahead.

TODAY’S GUIDANCE: The big picture supply fundamentals still look negative for the coming season, but the market is seeing firm buying from index funds, rising open interest and an inflationary tilt to commodity markets. At least for the short term, look for more of a bounce.

TODAY’S MARKET IDEAS: October sugar close-in support is at 24.29 with 25.55 as resistance. Look for choppy to higher trade over the near term. A close through resistance would suggest a challenge of the February highs.

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!

With solid support from outside market forces such has high energy prices and a weakening US dollar, the market has been able to resist another leg down for now. Talk of the oversold condition of the market and some talk that the Brazilian harvest will be delayed have helped to support prices. The sugar market managed a higher high yesterday but was unable to fully return to this week’s high. The market also saw some minor buying off concerns of delays in the Brazilian harvest, as that might serve to tighten supply up front. Other traders think that the eventual flow of Brazilian sugar will quickly limit near term gains and perhaps facilitate a return to the general pattern of weakness that has been in place since the February highs. The latest forecast calls for rains to continue across the main sugar growing areas in Brazil, which would continue to delay the harvest. There are also concerns that the cloudy and rainy weather that the region has experienced since the second half of February could have hindered the crop’s growth. Technical traders are pointing to a reversal on the charts, with the May contract making a new low for the move and then closing higher with an outside day up. The European Union has approved the export of 650,000 tonnes of out-of-quota sugar for the 2011/12 season. This move could encourage beet planting this season.

TODAY’S GUIDANCE: The market seems to have the supply fundamentals to trend lower over the near-term, and speculators still hold a hefty net long position, so selling could increase if support is violated. However, outside market forces are positive, and the action yesterday argues for some consolidation just ahead.

TODAY’S MARKET IDEAS: May sugar support comes in at 26.55 with 28.26 and 28.92 as resistance.

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!

After a dramatic plunge the past few sessions, the market looks to see at least a recovery bounce today. While there are still difficult tasks ahead for Japan, there appears to be a general sense that the situation is controllable, and the long liquidation trend in the commodity markets has slowed. May sugar collapsed to close 214 lower on the session yesterday, down to its lowest level since early December. A general need for cash by Japanese firms combined with a desire on the part of traders to move to the sidelines and out of riskier investments like commodity markets helped spark aggressive long liquidation selling from speculators. Open interest slipped to its lowest level since mid-December, as a technically oriented selling and lack of fresh fundamental news appeared to be the focus. Talk of a larger Brazilian crop this year added to the negative tone. Chinese producers plan to plant a little less sugar this coming season, but weather will be a much bigger indication of supply after several years of poor yield. China looks to produce about 2 million tonnes less than it will use this season, and it may need to import the balance, possibly more if the government wishes to expand its strategic reserves. Mexico’s sugar production through March 12th reached 3.37 million tonnes for the 2010/11 season, which is up 26% from last year. They are expected to produce 5.2-5.3 million tonnes this season versus 4.8 million last year. Ukraine’s production for the coming season is expected to reach 2.1 million tonnes, up last year’s drought-stricken 1.5 million. Good Brazilian weather and ideas that India may be a more willing exporter in the future also helped pressure the market. Traders believe that Japan may need to increase its imports this year.

TODAY’S GUIDANCE: The market looks to see at least a recovery bounce today, but a resumption of the uptrend may not be in the cards. A better supply outlook and concerns that producers around the world have expanded after high prices last year is probably enough to cause a continued long liquidation trend from speculators, who still held a net long position of 216,710 contracts as of March 8th.

TODAY’S MARKET IDEAS: May sugar support today comes in near 26.00 with 27.60 as first good resistance. Look for bounce to resistance but not much more.

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.

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 3-day surge in prices may have helped turn the minor trend in sugar from down to up, but it will take a significant weather issue in Brazil or another key producer to renew tightness concerns. For now, the market is absorbing better than expected supply from Thailand and the outlook for some exports out of India. May sugar closed 71 points higher on the session yesterday, close to the day’s highs. Ideas that higher gasoline prices might divert more cane to ethanol helped to provide underlying support. Ideas that China may be a more important importer this year and talk that the long liquidation trend from fund traders seen for much of February has slowed, added to the positive tone. A weaker US dollar and news that index funds are adding to long positions lent support. The International Sugar Organization revised their 2010/11 world production surplus to just 196,000 tonnes, down from 1.29 million tonnes that that had forecast in November. This is due to lower production from Australia and other key producers. The two previous years saw large production deficits, so the beginning stocks/usage ratio for the 2011/12 season is expected to remain near 25-year lows. Brazil’s southern state of Parana is expected to start its crushing season any day now, and output is expected to be up about 7% from last year, according to the state milling association. China sold 150,781 tonnes of sugar from state reserves, which was all that was offered. The government has now sold 771,705 tonnes of sugar into the domestic market since the season began on October 1st. In a sign of the times, Thailand is expected to set aside 2.8 million tonnes of sugar production for domestic consumption, which would be a record high. This is considered a preventative measure to avoid any tightness of supply and to reduce inflationary pressures. Slower demand recently has had Thailand sugar premiums trade at a 13-month low, but they were excessive for much of the past year due to the tight supply. Late last year, Thailand officials believed the sugar production would be just under 7 million tonnes for the 2010/11 season, but it is now projected at 7.8 million tonnes. Index funds have been more active buyers in the past few weeks. Keep in mind, they are currently long 166,319 contracts but that they held a net long of 392,740 contracts in May 2008.

TODAY’S GUIDANCE: The 3-day spurt leaves the market slightly overbought, but with positive outside market forces and higher gasoline prices ahead, the market may be well supported by new speculative buying. May sugar fell as much as 18.7% from the February highs, which might be enough to correct the overbought condition. Index funds have shifted to a buying trend, and a turn higher in open interest might be seen as supportive.

TODAY’S MARKET IDEAS: May sugar close-in support comes in at 28.55, with 30.00 and 30.74 as resistance.