New York sugar (SB) got slugged on Friday losing -1.2%, closing the week at 10.03¢ per pound. Nevertheless the tasty commodity managed to eek out a gain of 0.9% for the week, much to the displeasure of hedgers, who are "extremely short" according to last week's Commitment of Trader report. Will those commercial interests finally get the down-move they have been positioning for or are large specs, who are "extremely long", in-store for a sweet treat?
Q: What happens in the fourth quarter when sugar closes down big when hedgers are extremely short?
A: It would appear the Hedgers lose, at least over the next three weeks. During such time the price of New York Board of Trade’s (ICE Futures US) World Sugar contract typically surges 5.14%. The commodity gains ground nearly 82% of the time, with rallies outstripping declines by more than 3 to 1 margin in magnitude. Further, sugar's gains are statistically significant when tested at a 2% return level, garnering a t-stat of +2.06.
If you would like to see more details of this historical edge, go to www.markethistory.com
Jason Thompson is a Chicago-based speculator focusing on electronically traded derivatives and their underlying instruments.
