Special Report


Special Report-Soybeans

May 12, 2020


In yesterday’s letter I addressed four commodities that the Model LAWG647 (Model) had identified as being close to trend reversal and in RED ALERT status.  If you received my weekend letter “Trends and Reversals” you are already aware of the other commodities that are close to trend reversal.  I thought it might be a good idea to look a little further out and talk about another commodity which may be in position for trend reversal later in the month.  I have chosen July Soybeans.

What do we know?

We know that as of last Friday’s close July Soybeans are in a long term down trend and have been since the close of April 10.  We know that last Friday July Soybeans closed at $8.50 ½ and we need a close at or above $9.00 on Friday, May 15 to reverse the trend. Both the Negative and Positive Indicators are within the first standard deviation of the long term average.

Failing to close at or above $9.00 this Friday what do we need to in the next few weeks that will reverse the trend?

To determine that value first we need to determine what we do not want to see, and that would be a close significantly below $8.71 ¾, the key word is significantly.  So what is significantly?   I would not want to see a close this Friday in the low $8.50 or $8.40 range, in other words right in the area where July Beans are presently trading.  For the sake of discussion we are going to examine two different scenarios.  Using two different hypothetical closes we can come to a conclusion of the likelihood of a trend change in July Soybeans. First using a close this Friday of $8.71 the Model tells us we need a close at or above $8.61 ¾ on May 22 to turn the trend higher, more on this later.  Secondly, using the hypothetical price of $8.55 the Model tells us we will need a close at or above $8.78 on May 22.  Please be mindful if this Friday’s close is below the $8.55 the price needed to reverse the trend will higher.


You probably noticed in the above example that if July Soybeans close this Friday at $8.71, the market could break to $8.61 ¾ the next week and still turn bullish. This is not normally the case, but it can happen when the given market has built a longer term foundation.  Looking at July Soybeans we see that the last nine weekly closes have been in a 45 ¾ cent range, a high of $8.85 ¼ and a low of $8.39 ½. In my opinion that is a pretty solid basing action, and that is how the Model tells us that July Soybeans could break 9 ¼ cents Friday over Friday and still turn bullish.


July Soybeans can easily reach any of the higher prices I have addressed $9.00, $8.71, $8.78, we are talking Soybeans.  The question then becomes likelihood, given the present market conditions what is the likelihood of July Soybeans reaching those higher levels?  I am leaning without a great deal of conviction to not very likely. In the end we will need to see some fundamental factor come into play to light the soybean fuse.


There is one more item the Model points out that I want to share with you.  Should July Soybeans fail to reverse the trend the next two weeks it will then become increasingly more difficult for July Soybeans to turn bullish over the following four weeks.  That does not mean July Beans will definitely see another leg down, July Beans could remain in the base building mode.


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.