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NY Sugar N.11 - Soft commodity reflation trade

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I have been tracking a few soft commodities to see if there is anything to this idea of a reflation (wider economy inflation) across all commodities.  The idea is that the Fed policy will eventually produce the much sought (by the Central Banks at least) inflation but that the Fed will not be able to control it so we will get runaway inflation that will be led by commodity prices.  This has proven correct on Coffee so far...

Sugar is a contrarian play as the received wisdom is "sugar bad!".  However, as has been suggested by @TrendFollower I think, there seems to be an under supply at present as producers exit the market.  Again similar to coffee but for different reasons: for sugar is seems to be a consumer health driven issue but for Coffee it is good old fashioned supply/demand.

On the Technicals front the situation is similar between Coffee and Sugar on the charts with a wide price range and the markets completing a touchdown at or near the bottom in an A-B-C wave form, suggesting the next move will be up and will go higher than the recent highs, it certainly has been on Coffee!  Note this is also similar on Gold...

  • The recent move down looks like and A-B-C with strong PMD at the recent turn (monthly chart).  Wave C concluded on the Fib 76%, not marked on chart
  • On the weekly we can see a possible 1-2 (pink) rally and retrace within a channel that was then broken and failed a retest before rallying further in a series of 1-2 waves
  • Zooming in on the daily we can see a V-Bottom at wave 2 (pink) and then the 1-2 (blue) produced a double bottom with PMD at wave 2 (blue).
  • There is an ice line across the top of the V-Bottom that coincides with the next 1-2 (green) and is a strong area of resistance (now support after the breakout).
  • We now appear to have a 1-5 up to wave 1 (brown) and a short wave 2, which has just broken higher as I am writing this...

There is still a possibility that we see a retest of the ice line (crica 1290) but if the break of 1380 is confirmed then this is, for me, a bullish sign.  A next resistance level break would seal it for me.  If this is a turn bullish then this trend could run for some time and many points.

SB-Monthly_100120.thumb.png.713a3bee6fe5874b4a0cfe2e2cf8d558.pngSB-Weekly_100120.thumb.png.d61a5740067ff8e4268dbe9e2e536d25.pngSB-Daily_100120.thumb.png.b297c4fcda2fef9c5259ad48f91c618f.pngSB-1-hour_100120.thumb.png.99641e894ea3d440d0003c3f68cd3a6a.png

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Break higher occurred right on cue.  Certainly looks bullish on the weekly chart but need to guard against a potential reversal at the next resistance point, which could produce a retrace (counter trend) back to that ice line (1290).  A firm break higher would be a strong support for a long term rally from here.

SB-Weekly_110120.thumb.png.bd00b31f3a2a032d5c14dc5259cb3f33.png

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Price has poked into the previous high (pink 1) resistance zone, which could spell a big breakout.  Risk is a pull back before that but for me the chances of a retest of the ice line (see previous post) are reduced as a result of the break above 1380.  Sugar is getting interesting now...

SB-Weekly_140120.thumb.png.fb254b185775fd2117dc9283d39be426.pngSB-1-hour_140120.thumb.png.894beb7e5be057201036549d0d4b83bf.png

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May be seeing a short term retest and rally at the breakout zone on NY Sugar.  If we do get a higher high then the next target resistance would seem to be around the 1540 area and a break out through this puts the market into clear air for a long term rally IMO.  Short term retrace bearish moves still a concern until the breakout but the signs are good and the chances grow with each resistance broken, given the bullish set up outlined in the opening post.

SB-Daily_150120.thumb.png.be6f2500f6a901bca49b5d49aab7e723.png

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