True or False -- Crude oil prices move in step with sugar prices. Reason being, the higher the cost of oil, and the greater the demand for “cleaner” fuels such as cane-based ethanol.
Answer: That depends on whom you ask. According to the mainstream financial experts, the above statement is 100% spot on -- as the following news items affirm:
- “Sugar appears poised to reap the records of high energy prices.” (July 9 Reuters)
- “Sugar futures fell in sympathy with oil.” (September 23 Reuters)
- Sugar prices down more than 20% since September. “This is due to liquidations in commodities like crude oil following the global financial crisis. A big drop in crude prices pressurizes sugar as the concerns of…alternative fuel are eased.” (October 14 The Economic Times)
According to historical data and actual fact-based reality, however, crude AND sugar prices are about as synchronized as a dolphin and a duck-billed platypus. Case in point:
From a fresh contract high on March 7, 2008, SUGAR prices turned down in a three-month long sell-off that slashed 40% off its value. All the while, Crude oil enjoyed an uninterrupted winning streak above the record setting height of $100-, $110-, $120-, and $130-per barrel.
Flash ahead to today, October 16: Sugar’s most recent descent to a TEN-month low got started in late August; while crude oil prices kicked off their southern slide on July 11.
The only thing that is consistent about fundamental analysis of the world’s leading financial markets is its inconsistency. As for objective, original, and disciplined insight into where SUGAR prices could be in the days ahead, the October 16 Daily Futures Junctures has exactly that.
In the latest DFJ publication, Elliott Wave International’s senior commodity analyst Jeffrey Kennedy reveals that price action since late August is unfolding as a classic FIVE-wave pattern. Establishing a potential downside target, then, is as easy as using the “Guideline of Equality,” which states: When wave three is extended, wave five tends to travel the same distance as wave one.
According to Jeffrey, once price action confirms his wave count, the next big move in sugar could last weeks.