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A weak dollar and a jump in gold prices supported a recovery bounce overnight but it will take a move to new highs or over 27.49 March sugar to negate the potential impact of the key reversal from contract and 29 year highs. The market remains in an extreme overbought condition but outside market forces are positive and longs have little reason so far to move to the sidelines. A lack of new selling interest in this environment is seen as a positive force until support levels are violated. RSI indicators are showing an overbought condition but also a series of lower highs in the RSI during a period of higher highs for the market and the divergent signals suggest a loss in upside momentum. March sugar in London managed another new all-time high overnight which may help provide some underlying support. Egypt has extended the exemption of raw and white sugar import duties until June 30th which may help stimulate import demand. March sugar saw an impressive rally into the middle of the session yesterday and challenged the contract highs before closing slightly higher on the session and down 44 from the highs of the day. London white futures managed new all-time highs on the session as news of increased demand from Pakistan and Iraq helped to support. Pakistan plans to issue a tender to buy 150,000 tonnes of white sugar on January 1st. This is the first tender with a goal to import 500,000 in order to meet domestic needs and maintain strategic reserves. The Trade Minister in Iraq approved the purchase of 250,000 tonnes of white sugar which helped provide support and there was further talk of too much rain in Brazil which has halted harvest activity. Harvest is normally complete by now as normal rainfall is too much to deal with but sharply above normal rains for the second half of December have brought the harvest activities to a complete halt in most areas.
TODAY’S GUIDANCE: The market is showing signs of a near-term top from an extreme overbought condition. March sugar near-term resistance is at 27.49 and a move under 26.92 could spark long liquidation selling and a correction to key support back at 25.14 and 24.42.
TODAY’S MARKET IDEAS: Longs might consider exiting the market or at least sell some call premium while aggressive near-term traders can trade from the short side for the next week to ten days.
