Bean, Bean Meal Recoveries in Full Swing; Leave New Risk Levels

October 27, 2016 3:53AM CDT

JAN SOYBEANS

Yesterday's clear break above Mon's10.09 high reinforces our broader bullish count and leaves Tue's 9.92 low in its wake as the latest smaller-degree corrective low and new short-term risk parameter this market is now minimally required to fail below to threaten this call.  Former 10.09-area resistance is considered new support ahead of further and possibly surprising gains.

Soybeans 60 min

Soybeans Daily

The directional jury as to whether the current rebound is merely a slightly larger-degree correction or major reversal higher may remain out for quite a bit.  However, two technical FACTS result from the past week's breakout above 20-Sep's 9.99 high:

  • this year's Jun-Sep downtrend from 11.82 to 9.40 has been broken
  • the current larger-degree trend is UP with weakness below at least Tue's 9.92 corrective low and preferably 03-Oct's 9.80 (minor 1st-Wave) high required to threaten or negate it.

Former 10.10-to-10.00-range resistance is considered new hear-term support ahead of further and possibly surprising gains.  The daily log scale chart above shows that the market has already retraced a Fibonacci minimum 38.2% of Jun-Sep's 11.82 - 9.40 decline.  But to conclude this relatively shallow rebound as a complete correction, the market would first have to confirm a bearish divergence in at least short-term momentum below 9.92.  In lieu of such weakness this merely derived Fibonacci fact means nothing.

Soybeans Weekly

From a very long-term perspective we continue to believe that Nov'15's 8.44 low COMPLETED the secular bear market from Sep'12's 17.89 all-time high as introduced in 30-Mar-16's Technical Blog and that the relapse from Jun's 12.09 high is the major B- or 2nd-Wave correction within a huge, possibly multi-quarter base/reversal PROCESS.  This does not necessarily mean we believe the market is now poised to resume this year's earlier rally to new highs above 12.09.  Indeed and as shown in two previous base/reversal processes from Jul'09-to-Jul'10 and Nov'05-to-Oct'06 circled in blue below, our current bullish call could mean only the very first rebound within a 9.40-to-10.50ish-range that could span the next YEAR.

Within this suspected major range the market's upside potential is indeterminable and potentially surprising.  We've noted the (10.54) 50% and (10.83) 61.8% retraces of Jun-Sep's 11.82 - 9.40 decline in the daily chart above, but these are only guesstimate reference points that don't mean much, if anything.  What DOES mean something are the specific risk parameters at 9.92 and 9.79 that this market is required to sustain gains above to maintain a more immediate bullish count.  In lieu of weakness below these levels, further and possibly surprising gains remain anticipated with former 10.10-to-10.00-range resistance considered new near-term support.

Soybeans Monthly

DEC SOYBEAN MEAL

In last Thur's Technical Blog we suggested the developing meal bull might have taken its cue from the Chicago Cubs offense.  After yesterday's impressive meal rally that reinforces our broader base/reversal count, perhaps it was the Cubs' hitters who were inspired last night by the meal market's performance.  In any event yesterday's gains left Tue's 304.0 low in their wake as the latest smaller-degree corrective low and new short-term risk parameter the market is now minimally required to fail below to threaten a count calling for further gains and a major correction or reversal of Jun-Sep's entire 418.7 - 294.1 decline.  Former 310-handle-area resistance is considered new near-term support ahead of further and possibly steep gains.

Soybean Meal 60 min

While overnight trading has slipped a bit from its break above 12-Sep's key 321.3 larger-degree corrective high, yesterday's rally is more than sufficient to conclude 27-Sep's 294.1 low as the END of a major 5-wave Elliott sequence down from 13-Jun's 418.7 high.  This strength confirms the break of this 3-month downtrend and correction or reversal higher that could be major in scope.

We note the pertinent Fibonacci retracements of Jun-Sep's decline in the daily log scale chart below, but these are of little use other than reference points without an accompanying bearish divergence in momentum needed to arrest the clear and present and developing uptrend.  What DOES matter are recent smaller- and larger-degree corrective lows and risk parameters at 304 and 295.3 that this market must now sustain gains above to maintain a bullish policy.  And until such weakness is shown, the market's upside potential should be approached as indeterminable and potentially steep.

Soybean Meal Daily

Soybean Meal Weekly

Finally and from a very long-term perspective, the weekly (above) and monthly (below) log scale active-continuation charts show Jun-Sep's EXTENSIVE rebuttal to Feb-Jun's equally impressive rally that we maintain is the same type of MAJOR base/reversal PROCESS that unfolded in the QUARTERS following Dec'08's 235 low and Nov'04's 146 low circled in blue below.  While we have stated specific reasons above to establish and maintain a bullish policy and exposure currently, we make no claims of a resumption of this year's earlier rally to new highs above 432.  What we ARE suggesting is that this market has now become vulnerable to a larger-degree recovery in what may be an even larger-degree (i.e. multi-quarter) range between Sep's 294 low and "some level" higher that could surprise many traders still focused on bearish fundamentals.  This "higher level" is indeterminable currently but potentially steep as long as the market sustains gains above at least 304.

These issues considered, traders remain advised to maintain bullish exposure from 307 OB recommended in 20-Oct's Technical Blog with a failure below 304 required to negate this call and re-expose the broader downtrend.  In lieu of such sub-304 weakness further and possibly surprising gains remain expected.

Soybean Meal Monthly

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.