For subscribers we do have orders that we are working as I speak to enter short positions if certain contingencies are met starting in the electronic session on Sunday night, July 5th.

Key Observations Regarding the Context in Which Soybeans and Commodities are Trading

The soybeans and soybean meal are still trading within the context and are subject to the projected deflationary declines in the stock market and crude oil as well as the overall commodities. The highs in these two markets and soybeans were made on June 11th. From a money management standpoint, any shorts initiated in the soybeans “would be adding to profitable positions in the S&P 500 and the crude oil.” We enter positions on the short side of the S&P 500 at 917.20.

We entered put options in the crude oil with the August trading at approximately 71.00, the S&P closing at approximately 893 on Thursday, and the crude oil actually dropping into new lows in the electronic session on Friday.

We are adding to short positions and that is critical to understand as a money management practicality since we don’t want to go out on a limb and have too much of a core position with respect to just simply shorts. Now, in the soybeans and soybean meal down here, we’re also trading within something of a vacuum. The soybean oil, corn, and wheat have performed miserably.

History shows that when there is a dramatic divergence like this, once the turning points are reached in the strong sisters, which are the soybeans and the soybean meal, the declines are invariably severe as the spreads between the markets realign themselves. I’m going to be showing you the soybean oil, wheat, and corn in a minute.
There is tremendous divergence taking place, and I believe that this is a bearish omen. It’s not only a bearish omen for the soybean meal and soybeans, but it means that those markets can come down very quickly.

Now, this is the Goldman Sachs index. We have Thursday’s low, which is the last trading session before the holiday. You can see that we’ve broken to new lows. This is as we had projected and desired would take place, so very significant trade on Friday.

The soybean complex, in a sense, is swimming against the tide as far as what we perceive to be, at this time, the trend. It can be a very severe correction in the Goldman Sachs index, overall commodity prices, and a severe correction in the stock market.

Looking at the July soybean oil, you can see that this historic bust cycle, the decline which occurred in the oil has been followed by, basically, two legs to the upside here, but very anemic. This market was the weak sister of the soybean complex, but it did not trade in lock step with the soybeans and soybean meal, so the implication is the fact that it has not followed suit.

The wheat hasn’t followed suit, having broken to new lows basis the July this last week. The corn market has not followed suit on the threshold of breaking to new lows. That is a real damper for the soybean and soybean meal party.

We’ve had a squeeze situation in soybean and soybean meal, but all of our work tells us that all of our tops are in place. Now, in the soybean cash, if you’ve seen any of our videos actually going back three or four months, we had projections once this low is in place on March second. Our target zone for the cash soybeans was for the market to rally into this target zone (See video) based upon the 1974 precedent. The 1978, 1949, 1976, and the 2005 precedents don’t actually show a projected top until the latter part of July, but we hit these four closest fit projections so the geometry of our bear market and bull market has matched these four and are the closest fit since 1936, when futures began.

Our projection had been that we would hit this projected area and that could set the stage for a very severe correction. In this short chart, which is the August soybeans, I want to show you what those corrections look like during those five historic precedents. I say this, as was the case in the S&P. If our projections are correct, prices running behind time.
This suggests the market could come down very quickly. These are the angles of the descent which took place during these historic moves. In four of the five the legs down were corrections in an overall bull market. Those are the green ones. The red was a first leg down in an overall bear market.

The probabilities favor that this was obviously a second leg up in a bull market. First leg, second leg, I’ll tell you that this will probably be a correction in an overall bull market and will be followed by a resumption of the advance. We are looking at this as a counter-trend trade, which we only do maybe 10% of the time. Ninety percent of the time we want to be on the long side of markets in favor of the trend.

However, by virtue of the extreme overbought condition, not just in the soybeans, but in the crude oil market, in the stock market, in many of the markets across the board. Certainly all of the energy markets by the law of action and reaction, we would expect to see significant corrections here. Therein lays the impetus for us being on the short side.

You can see that the market, after establishing selling off sharply, an initial little push here, a little bit of a decline, and then just surged the last two or three days of this last week. This puts the market in a very, very interesting position for us in that we closed at 11.54 basis the August, and in a sense, we’re running behind time.

These cycles should be pulling price lower at this point in time, and that means we can play catch-up very quickly. As far as the August soybeans are concerned, I’m breaking it down in this chart and really getting into the minutia because the overall trade pattern here is great for potential shorts.The first observation on July 1st, we exceeded the June 18th high at 11.62. Buy stops were hit on this three-cent minor breakout, but the market immediately reversed lower. This issued a minor sell signal. This is the pit session, by the way.

This is as of Wednesday that you can see that we saw this dramatic reversal to the upside on this first day, gapped up the next day above this minor high on 11.37, moved straight up to 11.65, would have run buy stops at 11:62 making it very difficult on those committed to the short side of the market.

On Friday we opened lower, and I’ll get to that in a minute, then rallied throughout the day to the 11.54 close on Thursday, which was the last trading session. After putting in this July 1st high, I say this: the next day the market opened 21½ cents lower in response to the dramatic selloffs in the S&P 500 and the crude oil. That would have been Thursday.

At the opening of the grain markets, the S&P was down 2100 points on Thursday, which was 2.3%, and the crude oil was down 260 points, 3.8%. The soybeans opened down 1.8%, and that was this open right here, but did not follow through to the downside, whereas the S&P and the crude oil continued making lower lows into the close. This resiliency indicated the market was not ready to give up the ghost; at least, not on Thursday.

It was a very good performance in the face of what happened in the crude oil and in the S&P 500. A very good performance on Thursday for the August beans. Now, notice also on Thursday the low at 11.33 retraced beneath the previous minor breakout high at 11.37.

We saw this breakout above 11.37, on Thursday we saw the dramatic opening lower, a little bit of follow-through, hit 11.33, and then immediately reverse to the upside. So anyone that bought the breakout above this 11.37 had to endure a selloff which would retrace beneath that low.

Any of the technicians that bought on the advance of 11.37 and placed their stops too close beneath this breakout price would have been stopped out on the break to 11.33. In addition, anyone who entered short positions on the decline beneath the 11.37 previous minor top had to withstand an intraday advance to almost unchanged at 11.60 – that’s as of Thursday – and then a close at 11.54.

Whether you were on the long side or short side of the market, it was very difficult conditions. As I said here, this was a difficult day for a contingence of bulls and bears alike. It was kind of a slice-and-dice situation. This is what we like to see in advance of a potential decisive price move in a market; longs and shorts not knowing whether they are coming or going. This is so typical prior to very significant moves that markets can move very quickly. It’s where there is price action, and this is what we look for; price patterns.

We have one here that makes the trade very difficult on both sides of the market, and the market stopping out people on both sides before the genuine move takes place. So the bottom line, starting Sunday’s electronic session if we break the 11.33 low by four cents, I believe the odds would be very high for July 1st having established a very important secondary lower top with the potential for the market coming down very quickly.

If we break this 1133 low by four cents, we should have what will define a very key high on July 1st. Not only that, but the probabilities would be really outstanding that we are going to see a continuation of what should be a very severe correction. In fact, I say the pattern is very similar to the topping patterns which took place in the September S&P and also in the August crude oil.

Now, there is a video that I’ve produced, Dramatic Declines in the S&P 500 and Crude Oil, with respect to what is taking place in the financial, specifically the S&P and the crude oil, which very much plays into the equations as far as the soybean complex. That video is also being produced concurrently with this one, so that is something that’s available. If you’ve not seen that video it does have a very important reflection upon our thinking in the soybeans, so I want to encourage you to see that video as well.

Projections for Agricultural Commodities and Soybean Complex

In looking at the September soybeans I want to make a note with regard to what’s taking place in the distant contracts. We’re into delivery in the July soybeans. The August contract is now the front month trading contract. The September and the November contracts are telling an interesting story as well. The more distant contracts are trading a significant discount to the front July and have been showing relative weakness. This is an indication the bloom is off the bull. We have the spot, the cash, at approximately 12.04. The November is down at approximately 10.18. That means that the new crop, as the result of fundamentals, is discounting the fact that the cash will be coming down. The cash price is going to be coming down, and this is the seasonal time frame for the cash to establish a very significant high.

All of the probabilities point to lower prices. It’s just a question of a price pattern setting up which would allow us to get short, but we have that going into the Sunday night electronic session.

The September soybeans rally has fallen short of this previous minor rally to the upside, whereas the August soybeans actually exceeded it by three cents in the pit session and a little bit further basis the electronic session. We have what would amount to bearish divergence, the relative weakness in the September contract and also the November contract, which has had some major price machinations with the market declining sharply, as of I believe this was Tuesday, dropping to 943½, running under all these minor lows, dramatic reversal to the upside, and rallying above the previous minor high.

This has made life very difficult on both longs and shorts, and that’s what we want to see. So I say here, very volatile trading conditions. This is a healthy precursor to continuation of this projected leg to the downside.

The other part of this equation, which is so interesting, is in looking at the soybean meal. This has been the strong sister of the complex. This is led the soybean’s higher and has been basically the center of the squeeze. There has been a short squeeze there.

The recent run to the upside in August Soybeans appears to be an extreme historic overbought condition as of June 11th, only minor corrections on the way up. We saw this very significant sell-off and we’re in the midst of this secondary rally to the upside.

But what is interesting about Thursday’s trade in the August meal is that unlike the soybeans in the electronic session, we did not move to new highs above the Wednesday high. We made a slightly lower top. As of the close at 382.20 on Thursday we are also closer to these two daily lows, 375.80, than we are in the soybeans.

We’d mentioned that the soybeans hit 11.33. That would be a critical price point and breakdown point for the soybeans. The critical price and breakdown point for the meal is 375.80, and we are closer to that low on a percentage basis than we are in the soybeans. The long and the short of it for us is that meal, which has been leading the bull market, we’re starting to see a chink in its armor.

That’s very critical since it’s the leader and has been the leader. It is subject to the greatest percentage decline once the top is in place, so this August soybean meal contract is likely in the most vulnerable position if we are right in our assessment that both soybeans and soybean meal have their highs in place. We are not sure of these markets yet, but we do have orders that we are working as of the electronic sessions on Sunday, and obviously it should be a very fascinating week this week to see how Friday’s dramatic sell-offs in the S&P and the crude oil are digested. That’s certainly going to play into this soybean equation as well.

I’m not presenting this information from the standpoint of saying, as a prospect, as someone who is not a subscriber, to motivate you in a sense of doing something in the markets. Obviously we are looking for people that will come on board, understand what we’re doing, understanding the proprietary nature of it, the fact that we’re doing work that isn’t available anywhere else.

It’s not because we have a historic database that’s second-to-none. There is a philosophy that we’re always trying to inculcate into our subscribers; the idea of us giving you the trade of the week or the trade of the day is not the point. Overall, if you’ve been listening to us for any period of time you know that as far back as I can remember, prior to the bust last year, we’ve pretty much had the inside track on all that’s taking place, so it’s on that basis that we’d love to have you come on board as a subscriber.

We experienced a huge bear market in the stock market (the S&P 500), the second greatest since 1886. The overall decline into the March 6th low was 58%.

The Goldman Sachs index experienced the greatest bust cycle in commodity prices in history (our historic database of commodity prices goes back to the early 1800s). The overall commodity market declined 66% in five months and 15 days.

When you have this type of wealth destruction, this implosion, or deflationary decline in commodity and stock prices, obviously we see these two markets very much joined at the hip as investors and speculators, and those in the economy are basically faced with taking evasive maneuvers.What we knew from history is that when we experienced bust cycles on this order, for example, like 1920, 1932, 1948, 1974, the lows in both stocks and commodities coincide very closely to one another. The S&P 500 bottomed on March 6th, and the cash Goldman Sachs we bottomed on February 18th, so within about three-and-a-half weeks of one another this deflationary implosion, this panic, this capitulation of longs was occurring across the board both in commodities, tangible assets, natural resources, stock market, really, across the board. That carries through with real estate, commercial real estate and so on.

Stock Market and Commodity Culmination Lows In Place

The S&P 500 has experienced a meteoric rise of 39% in two months and two days, from January 6th to March 8th (a runaway advance to the upside).

The  Goldman Sachs index experienced some basing, but the overall advance off the February 18th low has been 39% so both of the stock market and overall commodities have advanced 39%.That is still a far cry from where we’ve come from in the markets, but I don’t have to tell you that a 39% advance in any market, historically, is a very significant advance.These advances place us in the very elite category of first legs up in projected overall bull markets.

Trade Action and Investment Possibilities if our Market Forecasts are Confirmed

In the S&P 500, we experienced a historic bear market on the basis of all our projections this was a final low; and this is a first leg up in a bull market (see charts in video). The seven closest historic precedents that we’ve been able to isolate, in other words, markets that experienced the type of decline on the order of what we’ve seen in the stock market, this advance very much rhymes with what one would expect once a final capitulation low is in place and a violent short covering a first leg up in a bull market takes place in the aftermath of that capitulation low.

We are very much following the personality of first legs up. We have seven historic precedents that fall into the category of our market, the bear market that preceded it, and first legs to the upside.

What we do is we show those seven precedents. You can see we have 1974, 1908, 1987, 1904, 1938, & 2003. What this does is show the corrections which took place after the first legs up in these bull markets. This shows the percentage retracements of the first leg up which took place.

“At the completion of these corrections historic bull markets were resumed. The implication is straightforward. Once a correction on the order of these corrections has been confirmed, we need to prepare ourselves for a potential all-out buying opportunity as both investors and speculators for a second leg up in an overall bull market. This is the lowest risk point for investors to take action.

One of the things that the legendary trader W.D. Gann said, is that once a final low is in place, and sometimes it’s difficult to project a final low or to get in at the low for a bear market, but what invariably takes place is you have a first leg up off a final low, and this confirms that a final low is in place. In other words, all the dynamics, the geometry of that advance, confirms that a low is in place.  Once that first leg is complete then you get a secondary correction. This would be the first correction in an overall bull market.

Keep in mind that we already have confirmation that a final low is in place, so this correction sets the stage for the lowest risk opportunity to actually enter long positions do so on weakness, which is always ideal – buy on weakness sell on strength – so buy on weakness in advance of what would be a second leg to the upside. If we can experience a correction in the S&P 500, and it’s certainly possible that correction could occur off the 930.17 high, no guarantees there but it certainly can, and if we see a correction on the order of what we have seen historically – and we’re going to be monitoring this – then the stage is being set for a major stock market buying opportunity for a protracted bull market.

I believe buying the corrections is the lowest risk place in a long positions with very significant upside. You can see on three occasions, 1974, 1987, & 2003, almost the entire first leg up was corrected during that first correction in a bull market with lesser corrections occurring during ’08, ’04, & ’38.

Technical Analysis of the Stock Market

In looking at the technical condition of this market, the shorter term view, we’ve experienced three minor corrections of 6.4%, 5.6%, and 5.6% during this runaway leg up. The first minor indication a projected swing high will be in place will begin on an overbalancing of these minor corrections. A decline to 858.78 will confirm this. If the S&P 500 declines to 858.78 we will have exceeded by 20% all of the minor corrections (6.4%, 5.6%, 5.6%), that would tell us that the selling is better than the buying for the first time since March 6th, and that’s a minor indication that the correction can be more complex.

We are very close to possibly seeing  a breakdown beneath the recent minor lows 878.94 and we closed in the cash about about 885 on Friday. So if we break this 878.94 and continue lower, then this is going to be starting to define itself as “correction.”

Keep in mind that this is a projection that we have. If we do see a severe correction, obviously the bears will come out of the woodwork again; the news will turn very negative, the forthcoming news talking about how terrible the economy is and everything, that’s what we want to see happen because it’s going to coincide. Bad news invariably coincides with this corrective low, this projected corrective low.

Once these lows were in place what did the second legs up look like?

We are apprising subscribers with respect to what kind of opportunity are we looking at. If it’s a long term bull market then the probabilities are very high that it’s not going to be just a second leg up but there will be another correction and then another leg up.We really are looking at this through the lens of anticipating an unfolding of a long term bull market.

Commodities Markets History and Analysis

In looking at the Goldman Sachs index things get very interesting as well. Keep in mind that these markets (the stock market and commodities) have been moving in tandem. The expectation is that they are going to continue to do so, so they’re playing to the same beat essentially.

I guess you could equate somewhat in the short term this government stimulus  to crack cocaine in getting a temporary high which is what is taking place, I believe, in the markets, but then we are going to see a retracement.

Ideally we are going to see a retracement, historically that goes without even being said. That is just a historic fact. It’s on that correction that we would look to be being a buyer in both the stock market and the commodity market.

Commodity Market Observations: Goldman Sachs

Following the March 6th low in the stock market, stocks have advanced as much as 39%, and overall commodities 28%. That’s off of the March 6th low.The stock market bottomed at this point in time, commodities had all ready bottomed some weeks prior, so you can see that the advancing of commodities and stocks have basically gone hand-in-hand.

We have projected these markets continuing to trade in tandem with one another. Once the current leg up is in place in the stock market, and a sharp correction takes place, the probabilities would likely favor a sell-off in overall commodities as well.

In other words, if these markets remain joined at the hip we could be provided with ideal opportunities to enter long positions in both stock and commodities if the corrections coincide with one another. Obviously we would be selective in which commodities we would purchase.

Questions We Are Asking of Commodities Markets History and Stock Market History

So we are faced with, right now, answering the questions from history.

• Once the first legs up were complete in 1920, in 1948, in 1932, other deflations, 1974, what did the corrections look like prior to the next legs up?
• Then, what did the second legs up in the overall bull markets look like?

The way we’re viewing this in the commodities is that we have a range of commodities. Some of the commodities are going to be the leaders, and some of them are going to be the lagers. The challenge that I have as a publisher is to recommend and apprise subscribers and provide rationale for which commodities are going to lead and which ones are going to lag.That is homework that we are doing right now for subscribers in anticipation of the likelihood that we will see a correction in a point in time here, and it could be imminent as far as what is taking place in the stock market.

If the stock market experiences a correction here, it’s very possible and likely that commodities would also experience some deflation as well since they’ve been moving together.

Once those corrections are complete, that’s where we would be loading the torpedoes for what is the perfect place to enter long positions, historically, in speculative investment markets?

Commodity Trading for Subscribers

The last chart that I want to show you is the soybean cash (see video). The soybean complex has been one of the complexes that we have rejected as a leader during these legs up.

In the case of the soybeans we put our lows in December, rallied into January, and put a higher bottom in March. The final low in overall commodities was February 18th, so soybeans actually bottomed before the index did so this was a bullish indication for soybeans saying that it was in a stronger position and should lead during the current leg up, and it has.

We have a very well defined target zone in the soybeans based upon the 1974, ’77, ’49, and ’76 highs. We continue to progress along these angles of ascent into what would be projected highs.

The 1974 top occurred on May 28th, and we are coming up on that this week; the first of our cycles to top out. The subsequent cycles with 1976 topping out on June 26th and that is the last of them. We are pushing up towards our target area in the soybeans.Once these highs were in place, dramatic sell-offs took place. This will likely very much coincide with a deflationary move in overall commodities based upon the likelihood that the stock market would be declining as well.

That sell-off in the soybeans and the soybean complex could provide an ideal opportunity to get short, and while it would be a countertrend trade being the the soybeans are in a bull market right now, it would set the stage for a likely very severe correction in the soybeans. If you’ve been listening to recent videos you know that we’ve been long the soybean complex so we are going to be looking to take profits. We are down the road on this leg up and we are monitoring it very closely. The other side of the mountain will be a leg down and then from there a subsequent leg to the upside in the soybeans.

All of these projections we’re going to be providing to subscribers. The soybeans have been nothing short of remarkable with respect to how closely we have followed the key historic precedents ever since experiencing this historic decline. We hope we’ve given you some insight on what is to take place with regard to the overall investment environment.

We covet the opportunity to have you as subscribers during what should be a tremendous wealth-building opportunity if we experience corrections.

You can watch this video and gauge it, but I can tell you this, if corrections occur in the stock market and overall commodities, if that is something that starts to unfold over the next month to month-and-a-half, a correction, then be assured that we’re going to be on point over here in terms of projecting the completion of those corrections in anticipation of those very significant wealth-building moves to the upside.