Sugar Futures Trading 2012-06-02
Sugar futures trading was frustrating on Friday, June 1. My stop got knocked out in the early morning hours of that day's session. It's a good thing too, because prices continued to plummet an additional 25 points or so.
I am still in a bullish frame of mind for sugar futures. You might wonder, "Sugar has been in a steep decline for just over 2 months, how can you be bullish?!?!?!" I'm bullish on sugar because of signals I'm getting from COT (commitment of traders) data that I follow. I don't have COT indicators on my futures trading platform, and I am unwilling to copy and paste copyrighted visual aids taken from other websites. So I cannot demonstrate what the COT signals I am getting are. I am also bullish on sugar because of seasonal patterns. All in all, I am bullish sugar. To add to the fundamentals of COT and seasonality, we are still seeing a pretty nice MACD divergence in daily sugar futures trading charts. I will be continuing to look for buy entries in the October sugar contract.
Dang, how about that crazy US Dollar index?!?!?! It reminds me of the saying economist John Keynes once said "Markets can stay irrational longer than you can remain solvent." Whether the recent increase in the value of the USDX is due to problems in Europe, problems in the middle east, US jobs data, US gov manipulation, or angels and demons, we as traders are left to deal with it. So long as the USDX is acting like a safe haven and rallying, there will be a lot of other markets that will go down in value. However, "all good things come to an end" and "what goes up must go down" are just as good of sayings as the afore mentioned one by Mr. Keynes. For the past two weeks, the MACD histogram on daily USDX charts has been failing to make the same new highs as price has. We may not have seen a top yet, but Fridays price action was pretty suspicious. Price ranged 1.000 ($1000), which is a pretty big range for the USDX. It also closed down for the day within the bottom one third of its daily price range. It would not surprise me at all if this was a top. Another reason I am still keenly looking for a buy entry in sugar, and why I am rather frustrated at my early entry and stop out. That being said, I'd be a lot more frustrated if I hadn't been stopped out and was in the red extra money as we speak. Always use protective stops.
In my last post I said gold was starting to look very attractive, but I did not enter a trade. Friday we saw gold prices rally significantly. I am hesitant to enter into this market because trend is still undetermined. There are a lot of people on both sides of the market in gold, bears and bulls alike. Both have very strong arguments. I won't go into detail, but I am seeing some suspicious activity in the COT data for this metal. Its too suspicious for me to form a reliable opinion, so I won't and I won't trade it. However, my inclination is to look for a new upward trend, so I will keep my eyes open for confirmation.
Futures Trading Summary
I am still bullish on sugar, although my open position was stopped out. I am bearish on the USDX, but as our friend Mr. Keynes tells us, we should be wary not to be in a position that could challenge our liquidity. Gold is as mysterious as it is beautiful, and I am finding myself eerily drawn to it, but I will proceed with caution and wait.
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