Beans, Bean Meal Maintain Consolidative Structures from Range-Centers

November 10, 2017 9:06AM CST


The market's clear failure yesterday below our short-term risk parameter at 9.86 and rejection of the upper recesses of the past month's range defines yesterday's 10.08 high as the b- or 2nd-Wave correction of Oct's 10.13 - 9.81 decline.  Yesterday's relapse confirms the resumption of what we believe will be a correction of Aug-Oct's rally that may still be contained by 27-Oct's 9.81 low or could easily break it ahead of further losses to 9.60 or below.  Regardless of what lateral-to-lower prices the market has in store, yesterday's 10.08 high identified THE high and new key risk parameter it now needs to sustain losses below to maintain a more immediate bearish count.  Its failure to do so will confirm the sell-off attempt from 13-Oct's 101.3 high as a correction within our long-term base/reversal count ahead of what then could be surprising gains.

Soybeans 60 min Chart


Soybeans Daily Chart

In yesterday morning's pre-report Technical Blog we highlighted the market's position currently deep within the middle-half bowels of the past THREE YEARS' range where the odds of aimless whipsaw risk should be approached as higher than usual.  Yesterday's price action provides further evidence of this affliction.  If there's a bright side however, it's yesterday's 10.08 high and new key risk parameter resulting from the post-report relapse.  While that high remains intact as a resistant cap, further lateral-to-lower prices are anticipated with a break below 27-Oct's 9.81 low and 38.2% retrace of Aug-Oct's 9.29 - 10.13 rally reinforcing this call and exposing further correction of Aug-Oct's rally.

As for the market's down side potential below 9.81, we believe it must first be approached as indeterminable.  There is no way to conclude either a break to "just" the (9.60) 61.8% retrace of Aug-Oct's 9.29 - 10.13 rally OR a collapse/resumption of the secular bear trend to new lows below Nov'15's 8.44 low.  This said however, we also believe that the market's 3-YEAR rejection sub-9.00 levels and the lower-quarter (i.e. below 9.25) of this 3-year lateral range gives higher odds to "just" a correction of the Aug-Oct rally within a major BASE/reversal count that will ultimately produce 12.00 or higher levels before sub-9.00 levels.  Against this long-term base/reversal-threat backdrop such a sell-off to 9.60 OB would present an outstanding risk/reward buying opportunity for long-term players.

Soybeans Weekly Chart


This long-term base/reversal count remains predicated on:

  • early-2016's bullish divergence in MONTHLY momentum that, in fact, breaks the 3-year downtrend and defines Nov';15's 8.44 low as the
  • END of a 5-wave Elliott sequence down from Sep'12's 17.89 all-time high amidst
  • historically bearish sentiment not seen since 2003 and where
  • the 2012-2015 secular bear market EQUALLED EXACTLY (i.e. 1.000 progression) BOTH the 2008 AND 2004-05 bear markets in length.

This Fibonacci fact (that was also mirrored in the corn market!!!) remains a compelling mind-boggler and contributor to a list of base/reversal factors that will remain intact until and unless the market breaks Nov'15's 8.44 low.  Against this backdrop any interim dip or continuation of the past month's non-uptrending behavior could be a 2017 Christmas gift for long-term bulls heading into the 2018 crop year.

These issues considered, an interim cautious bearish policy and exposure remain advised ahead of further lateral-to-lower prices (especially on a break below 9.81) with strength above 10.08 required to negate this call and reinforce a base/reversal count that could surprise to the upside.

Soybeans Monthly Chart




Similarly, yesterday's relapse below 03-Nov's 312.7 low rendered the past week's recovery attempt top yesterday's 321.9 high a 3-wave affair that is considered the b- or 2nd-Wave correction of late-Oct's 329.8 - 310.8 decline ahead of a (c- or 3rd-Wave) resumption of that downtrend that preceded it to new lows below 310.8.  As a direct result of this relapse we are considering 322.0 as our new key risk parameter from which an interim bearish policy and exposure can be objectively rebased and managed.

Soybean Meal 60 min Chart


Soybean Meal Daily Chart

As the dominance of the 295-area support is clear in the daily chart of the Dec contract above and its weekly close-only chart below, traders are advised to first approach further losses as just a correction of Aug-Oct's 295.1 - 329.8 rally and an eventual favorable risk/reward buying opportunity.  Until stemmed by a confirmed bullish divergence in momentum however or a recovery above 322, the depth of this correction is indeterminable.  We noted the (308.4) 61.8% retrace of Aug-Oct's rally as a "reference point" around which to beware such a mo failure, but this merely derived level is NOT considered support.

The weekly chart below also show the magnitude of the incessant lateral range between 337 and 297 over the past 17 months where continued aimless whipsaw risk should hardly come as a surprise.

Soybean Meal Weekly Chart


From an even longer-term perspective the weekly (above) and monthly (below) log scale active-continuation charts present the same MAJOR BASE/REVERSAL conditions as those detailed above for bean.  To threaten or negate this long-term bullish count all the bear has to do is (first) break the 295 lower-quarter of the 3-YEAR range and then (secondly) SUSTAIN trendy, impulsive price action down and break Feb'16's 258 low.  Simple and clear.

Price action other than this- like the market's continued 3-YEAR rejection of sub-300 levels and a recovery above 322 and then 330- would reinforce this bulish count and call for a run at 400-to-450 or higher next year.

These issues considered, an interim cautious bearish policy is advised ahead of further lateral-to-lower losses to the 308-area or lower with a recovery above 322 negating this call, warranting its cover and resurrecting a broader bullish count towards Jul's 348 high.


Soybean Meal Monthly Chart

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

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.