Trade of the Day: iPath Sugar ETN (SGG)

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Stocks started the week on their left foot, beginning on Monday with a negative opening that stemmed from a parliamentary election in Greece.

Now, just the fact that I said that the U.S. market reacted to an election in Greece has got to make you say to yourself, “What the heck?!” Why would anyone trading U.S. tech, drug and retail stocks care about what happens in Greece? And the answer is, honestly, they don’t.

But overnight futures traders reacted immediately to the election results by taking the S&P 500 down as many as 13 points. The premise was that if this radical left-wing party, which is opposed to austerity measures imposed by Greece’s financial overlords in the eurozone, were to abrogate its contracts, then the global financial system would collapse and markets would be left in smoking ruins.

Except for one little thing: The facts and reactions were all messed up. The reality is that the austerity measures laid down by the eurozone on Greece are patently ridiculous and have completely failed to help that country arise from its indebtedness and move toward a long-term solution. The people of Greece were just fed up with all the lies and corruption of the political parties that got the country into this mess, and sought a party that might have a backbone, or at least a new potential solution.

Trade of the Day: iPath Bloomberg Sugar Subindex Total Return ETN (SGG)

The two sides will ultimately have to hammer out a compromise, but my guess is that Greece is not going to leave the eurozone and the financial overlords in Frankfurt are not going to get back every last dime that they lent.

While the latter sounds bad, you have to remember that the German, French and British banks that lent money to Greece a decade ago were the equivalent of Citibank offering scandalous subprime loans to people in the 2002-2006 period in the United States that led to the residential real estate wipeout. The lenders were almost as at fault as the borrowers, and, in most cases, worse because they knew better. They were greedy and overzealous and on some level don’t really deserve to get all their money back.

So, at some point on Monday morning, investors, in their collective wisdom, figured all this out and began to buy the S&P 500, the Russell 2000 and the Nasdaq. And before you knew it, there was a pretty good rally on by early afternoon. Ultimately the rally backed off, but note that the S&P 500 Volatility Index (VIX), sometimes called the “fear index,” sank 6.5% to its lowest level of the year — signifying that anxiety is abating and investors are starting to think about buying stocks again rather than plunging oil prices or Greek elections. In that vein, here’s a bullish trade on a seasonally strong commodity.

Trade of the Day: iPath Bloomberg Sugar Subindex Total Return ETN (SGG) iPath Bloomberg Sugar Subindex Total Return ETN (SGG) is an exchange-traded note that tracks the price of sugar. Prices have been falling for three years, but have just started to perk up again here at the start of 2015, much as they did at the start of 2014. There is still plenty of sugar supply available in big producing countries like Brazil, Mexico and Ukraine, but the price occasionally gets rationalized as growers take acreage out of production.

Sugar jumped in the futures market on Monday, pulling SGG shares up 1.3%. Buy SGG at current levels for a target of $41.85 limit, good till cancelled. Set a protective stop at $37.25 limit, good till canceled.

Jon Markman operates the investment firm Markman Capital Insights. He also offers a daily trading advisory service, Trader’s Advantage, and CounterPoint Options, a service that helps individual traders make steady, consistent profits with volatility-related instruments.


Article printed from InvestorPlace Media, https://investorplace.com/2015/01/trade-day-ipath-sugar-etn-sgg/.

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