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While somewhat overbought, the technical action remains positive, and the huge deliveries to strong hands have confirmed strong demand by India. Corrective breaks look like buying opportunities. July sugar pulled back a bit yesterday on profit taking, following last week’s sharp gains that were tied to expectations of strong import demand from India. A holiday in London made trading conditions a little thin, but the market managed to consolidate most of last week’s strong gains. Sugar pulled back despite supportive outside market action, including strong gains in equities that portend growing optimism for an economic recovery. Sugar also fell back despite a sharp break in the Dollar, perhaps because the market may have become short-term overbought. The latest COT report with options for sugar showed a big influx in the net long position by both large and small speculators as of early last week, which is clearly an indication sugar is becoming somewhat overdone. Speculators increased their net long position by 27,565 contracts to 168,226. Trend following funds increased their net long position by 16,396 contracts on the week, and index funds were also net buyers of nearly 3,400 contracts. High deliveries into strong hands against the May sugar contract kept sentiment generally bullish and seemed to attract fresh buying on the price dips, which limited losses. Brazil exported 964,400 tonnes of raw sugar during the month of April, which was up from 865,200 tonnes in March and up from 569,100 tonnes last year. Ethanol exports came to 201,600 liters as compared with 157,000 liters in March and 288,500 liters last year. Brazil’s Agriculture ministry indicated last week that sugar production could hit 36.3-37.9 million tonnes for the 2009/10 season (vs. 31.6 million last year) and that ethanol production may reach 27.8-28.6 billion liters (vs. 26.7 last year).

TODAY’S GUIDANCE: Buying support for October sugar comes in at the 15.25-15.16 zone with 15.91 and 16.17 as next upside targets.

This content originated from – The Hightower Report.