Yesterday saw the first significant retracement of the market in weeks, though with all traders back at their desks today following the array of public holidays there were questions as to how we would react. The answer was positively as Jul’23 moved up from initial lows at 25.45 against trade and consumer buying to be touching against 26.00 by mid-morning, though the higher levels saw the buying ease and so progress stalled. The arrival of the Americas based traders drew some fresh buying into the environment and Jul’23 pushed to new session highs at 26.06, however the buying of last month seemed to be lacking and instead of pushing on to claw back more of yesterdays losses the market started to slip back. All was calm until the 23.80 area, where and increase in selling triggered long liquidation and algo activity which accelerated the decline into the 25.30’s before any support was uncovered. That was not the end of the losses however and a further move to 25.15 followed before day trader short covering helped to bring values away from the lows. Through all the volatility there was a constant in the spread, Jul/Oct’23 holding a tight band either side of 0.30 points through the day on a solid volume of 20,000 lots. A calm final hour suggested that the market had incurred sufficient loss for one day but MOC selling emerged to register new session lows at 25.07 with Jul’23 settlement at 25.14. The activity of the last two days may well be motivated by the presence of so much Brazilian sugar in the May’23 delivery, but whatever the reason it has served to bring the short-term indicators out of overbought territory. The sharp daily uptrend has been broken, and while that alone does not signal that the market will break down further it does serve to suggest we have seen the highs for the time being with plenty of work needed from the longs to get the upside back on track.
With No.11 values having tumbled yesterday there was a significantly lower call being made for the whites, and a wild opening duly followed with Aug’23 gapping lower and trading as low at $693.50 before finding buying. Though No.11 was trying to reduce the impact of yesterday’s losses its gains were modest in comparison to the recovery being made by the whites, and with the intra-day chart gap closed just over an hour into the day so there had been a strengthening of the nearby white premiums, placing Aug/Jul’23 back around $140.00. Having returned to be little changed from Friday’s closing level the market proceeded to edge along sideways for a few hours, showing stability though struggling to make any additional gains as No.11 lagged. All remained calm until mid-afternoon, when some light selling emerged to push back down through a vacuum and quickly leave prices struggling back around opening lows, a great example of the problems that longs may face should a further retreat lead to breakdowns in the technical picture. Further losses were recorded in reaching $689.30 before short covering kicked in, though the rally was capped out beneath $700 leaving prices to see out the remainder of the session at the lower end of the range. Ironically after recent weakness for the Aug/Oct’23 the flat price losses came alongside a recovery to $12.50, and there really isn’t a great deal of pattern that one can find presently with assorted contrarian signals being seen in the market. Aug’23 was pushed back towards the lows late on to settle at $693.60, leaving last weeks contract highs as something of a distant memory.
