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The market seems to be seeing some correction of the oversold condition with the consolidation period since March 23rd but it is still not clear if the long liquidation trend is complete. London futures were closed yesterday but start today on a firm note despite weakness in outside markets. The technical action from New York late last week looked supportive but there was a lack of follow-through interest yesterday. Traders see the outlook for a much larger Brazil crop for the coming year along with indications that India production for the season ending this fall will come in closer to 18.5 million tonnes than 16 previously believed continues to weigh on the market. The COT reports on the weekend showed a fairly aggressive buying trend from funds and specs which is normally seen as a supportive force but given the steep downtrend, the fact that specs still hold a hefty net long position has traders nervous that the trend will remain down until the spec net long position is reduced. The combined (non-commercial and non-reportable) net long position increased 4,281 contracts for the week to a still high 158,744 contracts. The market saw some follow-through buying and a bounce early in the session yesterday after Thursday’s key reversal pattern but the buyers could not hold futures higher and the market closed 15 lower for July and well off of the early highs. Outside markets were supportive with higher equity, energy and metal markets and a weaker tone to the dollar. The biggest volume day since February 22nd on Thursday helped to confirm the reversal bottom but at this point the July futures will need a move over 17.21 to attract new buyers.
TODAY’S GUIDANCE: While technical indicators and the chart formation suggests a near-term low is in place, the Commitments-of-Traders reports still show a hefty net long position from speculators which opens the door for more long liquidation pressure if support levels are violated.
TODAY’S MARKET IDEAS: Look for support for July sugar near 16.37 to 16.16. Resistance comes in at 16.90 and 17.20 and another leg down counts to 14.74.
