RJO FuturesCast

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Agricultural

Major Bottom in Soybean Meal?

Posted 05/28/2019 8:34AM CT | RJO Market Insights

While the hourly chart below of Globex day-session prices does not yet show overnight’s poke above 15-May’s 304.9 high and our key bear risk parameter, the market has recovered enough to identify 21-May’s 293.1 low as the end or lower boundary to a clear 3-wave structure down from that 304.9 high.  Left unaltered by a relapse below 293.0, this 3-wave sell-off attempt is considered a corrective/consolidative affair that warns of a resumption of mid-May’s uptrend that preceded it.  Per such we are identifying 293.0 as our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

Soybean Meal Jul '19 60 Min Chart

Soybean Meal Jul '19 Daily Chart

Today’s recovery above 305.0 is pivotal and warns of a base/reversal environment that could be major in scope for a number of reasons:

  • by recovering above an initial counter-trend high of 304.9 the market has confirmed a bullish divergence in daily momentum (above)
    • this mo failure defined the new longer-term trend as UP
  • the market’s failure thus far to sustain early-May losses below a TON of former support from the 302-to-300-area that should have provided new resistance if the market was truly weak “down here”
  • the market’s rejection (again) of the lower-quarter of the massive THREE YEAR lateral range amidst
  • historically bearish levels of market sentiment and
  • an “outside WEEK up” the week of 13-May’s 283.1 low.

These technical facts warn of a correction or reversal higher that could be major in scope with specific weakness below at least 293.0 now required to threaten this call.  And especially given historically bearish sentiment levels, the market’s upside potential should be approached as indeterminable and potentially severe.

Soybean Meal Weekly Chart

Finally, we would remind long-term players of the major, multi-year BASE/reversal-threat environment that remains intact from Feb’16’s 258 low shown in the monthly log active-continuation chart below.  Past major (base and peak) reversal processes included extensive corrective retests of either the low or high just like the past year’s relapse.  The bear had every opportunity to PERFORM when it demolished EIGHT MONTHS of support around 300, but it has thus far failed, tilting the longer-term directional scales back to the bull side with either a major correction or reversal like we experienced from the Sep’16 low and Jun’17 low.  To threaten or negate this major base/correction/reversal count the market has to now relapse below at least 293.0 and preferably below 283.0.

These issues considered, all previously recommended bearish policy and exposure is advised to be neutralized at-the-market (304.9).  Furthermore, setback attempts to 302.2 OB are advised to first be approached as corrective buying opportunities with a failure below 293.0 required to threaten this call enough to warrant its cover.  In lieu of such sub-293.0 weakness, further and possibly protracted gains are anticipated in the days, weeks and perhaps even months ahead.

Soybean Meal Monthly Chart

RJO Market Insights