May Beans Reaffirm Bearish Count, Nov Beans Next? | RJO Futures

March 24, 2017 8:17AM CDT


Yesterday's break below the past week's 9.94-area lows and support may not seem like that big of a deal relative to the past couple months' 9.5% slide, but it is because it identifies Mon's 10.09 high as the latest smaller-degree corrective high this market must now SUSTAIN losses below to maintain a more immediate bearish count that we believe could/should morph into a more emotional, fundamental affair.  In this regard10.09 become our new short-term risk parameter from which a still-advised bearish policy and exposure can be objectively and effectively rebased and managed for short-term traders with tighter risk profiles and even for longer-term players who may want to manage a portion of their bearish exposure more conservatively.

May Soybeans 60 min Chart


May Soybeans Daily Chart

The downtrend is clear in the daily chart above.  For what they're worth (nothing, actually, without an accompanying bullish divergence in momentum above a level like 10.09), we have noted a couple of neighboring Fibonacci progression relationships at 9.78 and 9.75.  From a broader perspective shown in the weekly log active-continuation chart below, the market remains deeps within the middle-half bowels of the past couple YEARS' lateral range where we always consider the odds of aimless whipsaw risk as being higher than otherwise.  IF a broader move south is either going to be deferred until some other time and condition OR negated in favor of a broader base/reversal count, then somewhere along the line this market would be expected to arrest the current and clear downtrend.  Its failure to sustain levels below 10.09 would be the first indication of such.  Until or unless such 10.09+ strength is proven, further and possibly accelerated, emotional, fundamental headline-driven losses remain expected and to what could easily be levels around last Sep's 9.34-area lows or below.

Soybeans Weekly Chart




November Soybeans Daily Chart


Basis new crop Nov beans Mon's 10.03 minor corrective high is our tight but key short-term risk parameter. As both the daily (above) and weekly log (below) charts show, the Nov contract has yet to break the pivotal10.80 low, support and long-term risk parameter it needs to to break the major uptrend from 02Aug16's 9.03 low.  If/when it does it will not only expose the new longer-term trend as down, it could render the broader recovery attempt from Aug'15's 8.57 low to Nov'16's 10.43 high as a 3-wave and thus corrective affair that could then re-expose the secular bear market.  Sharp, sustained losses would be expected in the weeks and perhaps months ahead per this count, and the failure below this specific 9.80 level would be the gateway to this bearish count and THE ACUTE AND OPTIMIUM risk/reward condition from which to establish and manage bear hedges.

November Soybeans Weekly Chart


From an even longer-term perspective shown in the monthly log scale chart below, we continue to believe that a major BASE/reversal-threat environment remains intact from Nov'15's 8.44 low.  As we've discussed often since last Oct's recovery, we believe the price action from that 8.44 low is virtually identical to the ends of both of the past major declines in soybean prices.  These former base/reversal environments are circled in blue below.  In both cases the market endured/suffered through one final sell-off attempt that NO DOUBT was fueled by emotional, fundamental, headline news that drove the huddles masses to the bear side.  Such a sell-off is what we believe lies in the weeks and perhaps months ahead.

We do NOT ignore at all the possibility of the 4-1/2-YEAR secular bear market collapsing to levels below Nov'15's 8.44 low.  BUT IF such a bear lies ahead, it would be integral for that downtrend to behave like one in a trendy, impulsive manner.  If, alternatively, this market drives down to, say, the 9.25-area amidst heavily bearish fundamental content that also drives the sentiment indicators to pessimistic levels AND the market all of a sudden confirms a BULLISH divergence in momentum, then we believe that technically this market will be providing an outstanding risk/reward BUYING  opportunity for the second-half of 2017 and possibly beyond.  But we can only cross that bridge if/when we get there.

In sum, a bearish policy remains advised for the May contract with strength above 10.09 required to defer or threaten this call enough to warrant defensive action.  The Nov contract has yet to break the pivotal 10.80 low and support, but we believe that lies ahead and will expose potentially steep losses immediately thereafter.  A cautious bearish policy is advised for the time being with a recovery above 10.03 required to negate this specific call. A sub-10.80 break also provides an acute risk/reward condition for producers to establish bear hedges and for end-users to defer their need for bull hedges.

Soybeans Monthly Chart


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