There was a bottom extension in sugar futures yesterday, as reported in the AlphaMail, so we advised covering the remaining half short position. There were also bottom extensions in Coffee futures, which is quite surprising as there is little in common between the supply and demand influences of these two commodities. Both can now be bought to go long with coffee being the favoured choice (just) if you only want one recommendation, as there was a monthly scale bottom extension 15 months ago that might still have some remaining life left in it. Charts:
We have a standard attitude to positioning when trading commodity futures that are settled by delivery – when going short choose a more distant month but when going long choose something closer so that any ‘squeeze’ on the near months will act in our favour. Buy May coffee or May sugar, not July or further forward.
Elsewhere, WTI crude oil has just re-compressed, meaning that we cannot any longer say whether the renewed weakness that we warned would happen in the Feb 25th edition will now occur. We didn’t advise selling short then because of some longer-term bottom signals that we now show here:
These monthly-scale bottoms indicate that the worst of the weakness is probably past and that some recovery is probable in the medium and long-term. Energy markets are only partially ‘free’ as we have written extensively in prior editions so a lot depends on the strength of Saudi Arabia’s conviction that they should continue to punish other, higher-cost producers to defend their market share. We are sidelined.
