Sugar: 06/04/2017

The clock struck 12:00 AM on New years night here in Cairo and everyone was joyous and people were throwing glassware out of their balconies of their apartment buildings in celebration(customary in Egypt). Little did they know what would occur to the prices of one of the essential commodities for all Egyptians. A few days after the new year’s day I remember asking the grocery store for Sugar and the worker replied “Sorry sir, we do not have sugar” So I drove myself to another grocery store to ask and got the same response. Considering how much I love my coffee every morning, I must have went to seven different grocery stores to receive the same response. Egypt had Just floated the Egyptian pound and the government planned to starve the population out of sugar in order to bring it back into the market at a much higher price. The price they had in mind was too high for a simple ‘few day shortage’ for people to accept. It wasn’t until a couple of months later that Sugar started to arrive in the market however at triple the price. The JOY of its availability led the people to ignore such high prices and purchased it without asking questions. It has long been the strategy of the Egyptian Government to do such embargoes on its own population since most of the essentials were subsidized and Egypt is trying to become a more free market economy. The floating of the Egyptian pound occurred at a bad time for sugar considering sugar experienced one of its greatest advances in several years at around the same time.

2017-06-04_3-18-27

The chart above presents my phasing analysis on the price of Sugar. It seems evident that we still did not hit an 18 year cycle low at the time of writing as is the case with many other commodities. The upcoming environment for sugar is likely to be choppy and not very directional until 2018 when I am projecting a blow off move in the prices of sugar that should last into 2020 as will be presented shortly. The patterns in Sugar are certainly very clear and beautiful to the trained eye. I have absolute confidence in the phasing of the chart above and hold no so called ‘alternate’ interpretation so let us hope that the market does not force me to come up with one.

2017-06-04_3-21-30

The chart above presents the dates in which I am expecting significant troughs and peaks in terms of the Sugar market. It seems evident that we shall soon come into a trough around the 14th of October after which we should witness an advance for the remainder of the year going into the month of April. The advance is likely to be a swift one that is likely to be part of a large accumulation pattern that has been unfolding since late 2015. The corrective dip that is sure to ensue after the abrupt advance is likely to terminate in the latter portions of 2018 after which the market is likely to take off to new highs relative to the previous 18 year cycle high that was realized in 2011 as was the case for most commodities. Speculators can begin watching this market closely for signs of a significant bottom for a move that is likely to be about 6 months in duration. As the market gives us more data we may alter the scale of the projection line displayed although the flattering nature of this projection with that of the other commodity markets certainly gives significant weight to the scale being used at this current point in time.

2017-06-04_3-34-19

Another reason to believe that we ought to be coming into a significant trough soon is the extreme in sentiment in terms of the COT figures. The speculators are almost as bearish as they were during the prior swing low in August of 2015. Another important point to note is the bullish nature of the commercials who are almost as bullish as they were prior to the previous burst higher. All this evidence tells us to be on the look out for a significant low in Sugar in October of this year. There is no reason to rush in at this current point in time. The projection line presented in the previous picture has a correlation coefficient of 90% so we have significant reason to believe that such correlation is likely to hold since it is not a random similarity but it is a similar cyclical circumstance.

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