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The one caveat to a sustained equities rally, especially after relatively dovish statements by Powell, is the return of inflation.

This could happen because of:

1. Supply chain and geopolitics
2. Government debt and interest on debt
3. Government spending
4. Weather
5. A softening of monetary policy that adds liquidity.

But we will know about inflation by watching:

1. Silver-and if it can begin to outperform gold
2. Oil, if spikes over $80 a barrel
3. Sugar, if even with increased production begins to move up back over 23 cents a pound
4. The dollar fails 103 and selling pressure returns. Rumor has it through Russia that BRICS is working to create an independent payment system based on digital currencies and blockchain

For today, let’s focus on sugar.

Sugar prices rally during El Nino weather patterns.

With heavy rains in Brazil and drought in India, these factors negatively impact sugar crop production.

El Nino in Thailand has created issues with millers reporting the lowest yield from crushed cane in the least 13 years.

India, the second-largest sugar producer in the world, reported that output fell and has maintained their restrictions on sugar exports.

In past Daily’s I have written about why sugar is a reliable barometer for inflation.

“I love to watch sugar as a barometer for food prices (it’s in practically every processed food product) and as a bellwether for social unrest and inflation.

Folks will fight over sugar when there are shortages….

As more and more reports claim inflation is over, the sweet white stuff is worth watching.” January 23, 2024

Looking at the futures chart, a move over 22.50 cents would be the start of a potential double bottom going back from December.

It would also clear a key moving average.

On our Real Motion momentum indicator, sugar had a mean reversion.

Now with gold and silver rallying, the dollar falling and Powell into the do-nothing mode on rates, sugar could just be the key.

ETF Summary

S&P 500 (SPY) 510 pivotal-as in below could see more correction

Russell 2000 (IWM) Unless clears back over 277.70, the reversal top could bring this back to 198 quickly

Dow (DIA) 385 support 400 resistance

Nasdaq (QQQ) After the potential reversal top, this had an inside day so watch

Regional banks (KRE) 45-50 range

Semiconductors (SMH) Another new high for our wonder woman!

Transportation (IYT) Looks better especially is this continues to a new ATH

Biotechnology (IBB) 140-142 resistance 135 support

Retail (XRT) Granny had a rough day-this makes us a bit cautious. 73 support

iShares iBoxx Hi Yd Cor Bond ETF (HYG) 77 big number to hold (still)

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