U.S. stocks are off to a strong start this morning, as US manufacturing data came out stronger than expected, as Federal Reserve Bank Chicago President Charles Evans stated that he thinks there should be easing in place until the jobless rate falls below 7% or inflation rises above 3%.
Sugar futures and natural gas futures are the biggest movers in the commodities complex thus far this morning. Natural gas continues its tear upwards, with a quick start today of +4%. Natural gas has shown an extremely strong rally last week, and continuing today with more buying. This a strong round of short covering, in addition to players buying in reaction to news of colder than anticipated weather in the Midwest, which could drive heating demand. Sugar futures are up almost 3% as of this writing, as price is above a couple of key technical levels: The double bottom at approximately $19 and above a key pivot level right beneath $20.
To analyze sugar futures, we have notated the chart below. As mentioned, there is a double bottom (as of now) at around $19. Just last month, sugar tested the previous low of June 2012, yet could not hold a move lower. Even with talks of a large sugar supply, prices have still rallied off of lows and have made a nice move up since then. We see the next major resistance area for sugar futures at the $22.50 area. A longer term downtrend line is still in place, so we are not quite calling this a bull market, yet strength is building. To declare a longer term trend reversal, we will have to see sugar break through the multi-month downtrend line and hold above that.
Click for larger version