January 15, 2019
By Mish Schneider
Sugar is a commodity I have written about from time to time.
I like to watch this commodity for several reasons.
First, it is often a lead indicator on inflation.
Second, it is the first instrument I ever traded a very long time ago when I was a Member of the Coffee, Sugar and Cocoa Commodities Exchange in NY.
Third, it moves.
Although it has languished for the last two years, check out 2010-2011 when it rallied from 12 to 38 in just a matter of about 12 months.
Or for our bears, when it proceeded to drop from the apex in 2011 back down to 10.75 (made in August this year.)
The 2018 low is not too far from the 1999 low of 10.36.
That means most likely sugar has once again bottomed.
If that is true, what can we expect for this commodity and what it might influence?
In November 1974, sugar futures made a high of 103.83.
I checked into the main events of the day.
There was the Watergate scandal (ended in 1974). Democrats made significant gains in the U.S. Congressional midterm elections, as the Republican Party suffered losses over the Watergate scandal.
And, it was the end of the 1973 oil crisis, but the beginning of an energy crisis.
Plus, Ali knocked out George Foreman during the Rumble in the Jungle..ok-not much of a sugar influence, but a fun fact nonetheless.
Maybe a coincidence, but I do find the comparisons to the Russian investigation going on now and the Watergate scandal from back then fascinating.
Regardless, today, sugar made a fairly big move up.
The chart on the left is a weekly one, on the right a daily one.
On the weekly chart, sugar futures cleared the 50-week MA and went into a Recuperation phase-needs to close this week out over 12.87.
On the daily chart, sugar futures are in a Bullish phase. Today, there was a capitulation over the 50 DMA with over double the average daily volume.
Furthermore, this move was in the face of firm interest rates and a rising dollar.
Of course this could be a one-day wonder. Nevertheless, we have big eyes here.
Not only could this be the start of a huge squeeze, it could also be the start of the Fed’s worst fears-climbing inflation.
Additionally, it could be signaling the end of the rally in equities and the start of the run in way oversold raw materials.
If that does emerge as a trend this year, you might find yourself singing,
“I just can't believe
The loveliness of loving you
I just can't believe it’s true
I just can't believe
The wonder of this feeling, too
I just can't believe it’s true” by Jeff Barry and Andy Kim.
S&P 500 (SPY) 263 is the overhead 50 DMA. Plus, more resistance up above there on the weekly chart. 260 pivotal and under 255 trouble.
Russell 2000 (IWM) 140 best underlying support and unless this can clear 145, we could see 140 soon.
Dow (DIA) 235 pivotal support-244.20 is the negatively sloped 50-DMA
Nasdaq (QQQ) Unconfirmed recuperation phase with the negatively sloped 50 DMA at 162.05.
KRE (Regional Banks) It’s all about the weekly close-over 50.25 great. Below, I will consider that a failure into resistance
SMH (Semiconductors) Now a confirmed Bearish phase. 90.00 pivotal with the 50 DMA at 91.17
IYT (Transportation) This still has a long way to go to see the 50 DMA at 178.70. So for now, a close under 170 would not be a good sign
IBB (Biotechnology) 110 next resistance with 106 closest support
XRT (Retail) 43.75 the pivotal number still. Above good, below we are looking at 42.25 support.
Every day you'll be prepared to trade with: