On February 8, the iconic "Google" logo was transformed into a row of round submarine windows to celebrate the February 8th birthday of famous science-fiction writer Jules Verne.
I thought it was appropriate, considering the commodity market this article is about: sugar. Over the past few days, sugar futures have plunged 20,000 Leagues Under The Sea.
The reversal kicked into high gear on February 3, when sugar prices sank an astounding 9% and prompted some analysts to suggest a "trading error" was to blame for the move. How else do you explain a fall so hard and fast when just a day earlier all of sugar's "fundamental" ducks lined up in a very bullish row, with a crop-damaging weather disaster at the top of the price-accelerating list? Here, the following news items from February 2 set the scene:
- "Cyclone Yasi's arrival in Queensland propels sugar prices to a record high. Queensland is among the world's top three sugar cane exporters. A third of the state's crop lies in teh direct path of the cyclone." (Guardian.co.uk)
- "Prices are expected to go even higher as damage from the storm is assessed. The cyclone is one more piece of bad news tightening sugar supply." (Wall Street Journal)
YET -- rather than soaring on the 300-kilometer-per-hour winds of Yasi, sugar prices turned down the very next day.
Whether they blame the February 3 slide on a computer glitch or cyclone Yasi's impotence, these are post-factum explanations. What would be nice is to have a warning before sugar fell 9% in one day. Well, you may be surprised to hear that there was one.
The drop was in line with the Elliott wave pattern unfolding in sugar's price chart. One day BEFORE the decline, the February 2 Daily Futures Junctures set the stage for sugar prices to sour. In that publication, editor Jeffrey Kennedy presented the following close-up and wrote:
"Sugar has been rising in five waves from 30.04 basis March, doing so as the last impulsive rally sequence...at a weekly/monthly chart level. It would take a print below 32.54 to build a more plausible scenario arguing that a major market top is likely in place."
Don't get tossed around by the "fundamental" storm. A risk-free Futures Junctures Service subscription starts here. And, there's no better time to sign up. Right now, as part of a Futures Junctures Service subscription, EWI has unlocked one of Jeffrey Kennedy's most riveting webinars to date. This educational and entertaining video provides the short-, and long-term outlook of 15 major commodity markets, including the biggest, big picture of the overall commodity sector going back 100 years -- and forward into the next three decades. With two hours of audio analysis and 78 visual slides, Jeffrey reveals one by one why the year 2011 could be an "exceptionally exciting" time. Click here to get started.