Subscriber Caliber Video #3

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Subscriber Caliber Video Update #2

This video series is a very close representation of our High Content Report publication. In fact, paying subscribers are receiving almost exactly the same video tonight. This video does not contain any new trades, however, the nature of the High Content Reports is to communicate the rationale behind our trade actions, as well as our strategy in approaching certain markets.

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• Video 1: Understanding Our Charts and Tables (60-min)
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• Chart Codes Reference Guide PDF

The Essential Course: A 66-lesson guide that shows you how our historic forecasting methods work, and why we do what we do ($197 value)

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• Chart Codes Reference Guide PDF

The Essential Course: A 66-lesson guide that shows you how our historic forecasting methods work, and why we do what we do ($197 value)

We’ve seen this dynamic inflationary move to the upside with the S&P 500. The stock market advancing 42%, the crude oil advancing over 100%; all of the markets inflating together, but our projections are calling for a major correction to take place. We are at, what could be, a very key inflection point for that correction to start.  At present, up until coming into yesterday, we had been long the soybean complex believing that that was going to be one of the leaders in terms of this inflationary push to upside, which we anticipated.

Soybean Futures Analysis and Trading

In looking at the soybean cash chart, these were the projections that we had placed on the market based upon the historic precedents which had the same DNA as our market; the 1974, ’78, 1949, 1976, & 2005 markets.

These were the angles of ascent during those advances in those years, and we had put these angles on the chart back somewhere in April so you can see that the price curve has followed it almost perfectly, rallying to as high as almost 1228 on June 1st. The target zone with all four of these four particular markets called for a push possibly up to 1264. We are basically in the neighborhood with respect to the final top in the soybean, so we took all of our profits in up to yesterday.

We are completely out of the soybean complex at this point in time, but more than that, we are looking to reverse positions and go short. I’m going to give you the rationale for that. In this table (see video) I show every runaway move to the upside in soybeans in history, since 1936. This move that we’ve had off the March 2nd low to the June 1st high has been a runaway move defined as a very aggressive move with only minor corrections on the way up.

These are the most profitable moves that history has to offer in any market. When you see very aggressive runs to the upside, in this case to the upside, you can see that on the way down that this was a runaway move to the downside before you experienced a correction. Runaway moves are really the prize in any market whether to the upside or the downside. We’ve cataloged every runaway move in history in the soybeans.

In this table (see video) we sorted by the length of time with which the time periods, or advances, took place. Our advance off the March 2nd low, which is the start of the runaway at 841, to the June 1st high at 1227, experienced a 46% advance in two months and 30 days. Almost three months. We show the time periods that we have equaled or exceeded in our market. The shortest time period was one month, three days; and the top of this was three months, one day, which as of June 3rd, today, we would be three months and one day from the lows.

You can see here that there are only 12 markets, 12 occasions in history, out of 45, approximately 25%, which exceeded three months and one day. You can also see that the next five were complete within three months and five days; that would be June 7th.

What am I saying? We are very mature in this runaway move and we would be looking to be very cautious about long positions which we have taken profits in as a result. This is one of the reasons that we did that. Yes, we can see some higher trade. Four of the precedents advanced as much as three months, 20 days, and these were the aberrant moves which exceeded three months. We know that we’re very mature in this runaway advance. In other words, in our case, we are looking to take profits but now looking to get short.

In looking at the percentage advances, we sorted that same table by the overall percentage advances during those runaway moves; our advance being 46%. You can see that there are only 12 advances which have exceeded ours in terms of percentage terms. This is a very pricey move, so to speak; an overbought situation.

Based upon both price and time, it’s time to look for a turning point. In this case we would look at it in anticipation of a bull market correction, to see a significant correction.
That being said, the next question that we want to ask in history is, of our five historic precedents what were the declines which took place once the top was in place in the runaway advance?

The June 1st high was 1227. That’s the high for the move basis the nearest futures. Is that going to be the high for the move? We could move incrementally higher, that’s a possibility, but we’re running out of time, at least based upon history, to do so. At least the probabilities would be very low for that.

If indeed we do have a high on June 1st of 1227, what we have here is the price curves of the five closest fit precedents based upon 1936.

You can see in the video, I’ve whited out what the objectives were to the downside. I’ve also whited out a specific trade recommendation for subscribers, but what we have is what I believe is a very high probability that this market is, if we don’t have a high at 1227 then we are very close.

We are sitting on the edge as far as recommendations for our subscribers to enter short positions. In fact, I have a recommendation today, Wednesday.

One of the comments I make here is, “Given the extreme velocity of the moves we continue to experience, I believe the odds greatly favor an angle of descent reminiscent of 1949, 1974, and 1976.” That is these angles of decent right here. In fact, there are two that exactly overlap one another, and that’s why it’s dark here.

“This is especially true if a serious correction is in the offing for the stock market once the current leg up is complete. As you know, that is my expectation.”

Looking at the soybeans, it is within context of what is taking place in the other markets. If a correction occurs in the stock market from what is also extremely overbought condition, up 42%; also in the crude oil which has advanced off the lows in December over 100%, if we see corrections in these markets, they should move in tandem and that would also reflect negatively on the soybeans, and the soybeans would be subject to that deflationary psychology. That is a favorable fundamental with regard to the context within which soybeans are trading.

Now, looking at the November soybeans, this is the new crop which is always important to watch at this point in the season. We rallied to as high as 1088, and we regained this low on September 18th.

We pointed out to subscribers that that would be a logical objective to having regained that low. If we reversed lower from here the market could be in serious trouble.

The July soybean meal, which has been far and away the leader, the strong sister in the soybean complex, this chart actually issued a sell signal in the last couple of days. We exceeded this 392.20 high, initially hit 392.40 then exceeded it fractionally to 393.90 on June 1st.

You can see that as of the close on Tuesday, June 2nd – I’m coming to you before the opening on June 3rd – we sold off a little bit, but this has just been an incredible aggressive move to the upside.

These are the comments that we made the day of the high. “Important pit had broken in the 392.20. The only resistance above that is the all-time high of 434.90. This would be a logical point for the market to fail.” In other words, our current price point is a logical point for the market to fail.

“However, we must contextualize what is taking place.” So what I was telling subscribers was “Yes, looking at the soybean meal in isolation we have a sell signal, but we have to understand that given the extreme moves that we are seeing across the commodity board in all of the markets as well as the financials and the stock market, we are subject to all of these markets moving together in tandem.”

Our final comments today; “We experienced a second rally into new highs above the 393.20 high. If price fails from here an important price could be in place.” That was as of the high. We’ve seen the market come off to 384.70 when this chart was captured, and so it will be very interesting to see what happens Wednesday with regard to whether that sell signal at the high winds up being valid.

Stock Market Trading For Subscribers

As I speak, this is a critical, critical juncture with regard to specific recommendations to subscribers.

In looking at the S&P 500, we’ve pushed above a very critical high, this January 6th high, which was the last bear market rally high. The DNA of this advance, what we’ve experienced off the March 6, 2009, low, is a bull market first leg up. All the DNA points to that based upon price patterns in the 1886 stock market. The logical point for us to have targeted was a move above the January 6th high, so we triggered all the buy stops of overextended shorts.

Those on the short side are betting on a depression, or whatever psychology was motivating them, while the logical place for technicians to place stops above a previous high so we have fractionally exceeded those highs based upon the June contract, which I believe I have. We exceeded the high by about 1150 points so we can be assured that a significant number of shorts have been run out of the market.

That being said, if the S&P turns lower from here that is going to be very favorable to our targeted short position in the soybeans.

The same can be said of the dollar index. The other day we dropped to 7837; that was on June 2nd, so we broke this December 18th nearest futures low. We haven’t broken the cash low. If we reverse higher from here, that would be negative presumably for commodity prices. Again, that’s a very tactical price point which was reached.

A lot of technicians or technical analysis practitioners would have been blown out of the market on the break of that low.

The crude oil has been advancing as expected. We’ve had these price curves based upon other historic bull markets on the order of what occurred on the crude oil. Implosions took place in all of these markets; sugar in 1974, silver in 1980, cotton in 1960, 1864, and corn in 1864.

The culmination point led to significant leg to the downside so we’re becoming very mature as far as this leg up in crude oil is concerned, plus there is a significant carrying charge premium on the distant contracts which is going to be playing very favorably into short positions if a sell signal is given.

* Please comment on the video at the bottom of the page *

How Far Will this Leg in the Soybeans Continue Before Completion?

Essentially, on long 38 call options which we purchased at 60 points, those options have pushed up towards 300. If we hit up toward the 43 level those options will return approximately 10:1 return. I point that out because any time you have the options it’s the last 3.00 in this case.

You move from 30 to 40, that’s great. You’re seeing a good rate of return but the next $3.00 is where the multiples really kick in. The information we’re giving subscribers is very critical right now with respect to the termination point of this projected leg up.

Reviewing our research I don’t have anything that tells us that a final top for this leg should be in place at this point in time. It’s not to say that it can’t but the probabilities are very low, perhaps a 90% probability we have further to go to the upside, $3.00 further to go to the upside in the soybean oil and that means further upside in the soybeans.

I want to show you the charts and the forecast that we have and give you some very critical perspective with regard to the law of action and reaction. I’ll talk to you about that in a minute.

With regard to the soybean advance, this commodity forecast was based upon the closest fit advances in history; the closest precedents that matched this price curve.
They key one being the 1949 which is the 60-year cycle. In looking at our recent high of 1141 as of Wednesday, this advance has pushed up to what would be a minimum objective based upon the 1978 precedent. You can see that we would have quite a bit further to go if we were to replicate the 1949 precedent.

The cash soybeans gives us a different perspective, and I believe it’s more valid in terms of our forecast. During 1949, 1974, 1977, and 2005 precedents the advances off the comparable bear market lows to our December 5th low retrace the following percentages of the preceding bear market declines. The comparable bear market decline in 1949, the advance which followed retraced 65% of this decline. In 1974, 63%, in 1977, 66%, in 1975, 63%, and you can see that was the most modest in terms of price objectives. Also, the 1976 precedent I’ve added, that was 59% retracement because that was a very key precedent as it relates to the soybean oil and that would project at 1266½. We have these four precedents with the time frame of the advances are all very close, within a month of one another, projecting to approximately from the 1260 level up to the 1320 level.

Commodity Forecasting Methods – Action and Reaction

The Law of Action and Reaction. The action is the move to the downside. The reaction is the violent rally, a reaction to the oversold condition. We have a very high probability that this market has farther to go to the upside.

As you can see, thus far we’ve pushed to as high as 11, 11½. We have significantly further room to the upside based upon the 2005 precedent and even beyond that based upon these precedents.We’re really in a fascinating position having essentially purchased our long positions in the soybean oil very, very close to the March lows.

The previous chart was cash and in looking at the July futures contract the overall advance in the soybeans has been 36%, 34% in the bean oil, and 38% in the soybean meal. The meal continues to lead the complex higher.We have a breakaway decline which occurred in the July futures contract on the break of the 1150 low so there’s going to be some buy stops building above that breakdown low. You can see that after that low is broken the market should have declined into the final bear market low.

We’re approaching what was the breakaway point at 1150. There is going to be some buy stops there and that should be very interesting.

Also, in terms of monitoring this market and keeping our hands on the pulse, if we decline as much as 10.2% off any high we will overbalance the two minor corrections of 8.4% and 8.5%. We’ve had two minor corrections in a very aggressive runaway market, both of which were identical. The market time period on those was five and six days.

Off the current high at 1141, let’s assume that the market experiences a decline off this high. A 10.2% decline off that high would result in a decline of 1024¾, so if we dropped down into this region here that would be our first indication that the runaway configuration had been broken. That doesn’t mean that we turn into a bear market. It doesn’t mean that we would sell short, but it certainly means, depending upon where we are in our long futures and our long call option positions, that would have an impact on our thinking in terms of taking profits.

The other side of the equation, if we experience a decline exceeding six days we would overbalance time. When you overbalance either price or time, in other words you experience, in this case the biggest decline we’ve seen since March 2nd, that would indicate that the selling has been better than the buying for the first time since March 2nd and that is an indication that the market can be changing, at least over the intermediate term.

Commodity Market Observations – Soybean Oil

What we see in terms of legs up in bull markets, we are in a second leg up in a bull market and you can see the first leg up a December low, a correction, second legs having broken the January 7th high confirmed that we were in a second leg up.

What we had placed on the charts sometime back in early April was our forecast based on average legs up in history, so what we find is the median leg up in every leg since 1949 in the soybean oil had been three months, twenty-three days. That is where this diamond is here and that’s why this relates to this. That would be in the early second week of July that we would project a median move to the upside.

Also, only 8 of 46, or 17% of the legs up in history were less than one month and twenty-three days. As of May 9th we have crossed that one month and twenty-three day threshold. We find that 23 of 46 legs up in history, 50% of all the legs up in history, lasted between two months and three days which is as of May 18th, and four months and twenty-four days which is as of approximately the second week of August.

Fifty percent of all the legs up in soybean oil fall within this time band here. We enter that time band as of May 18th and that tells us that when you see a market move up like this, the further down the road you get and the more mature that leg gets the higher the probabilities become for a high being established; a final high in that current leg up.
Now we are very much on point as far as watching the market very closely. We want to realize as much profit as possible and also move our stops up as need be. We’re monitoring the situation very closely.

What we also find in history in terms of legs up, the median percentage advance was 46%. We’ve advanced 34% in the soybean oil thus far. The median advance, in other words right in the middle of all of the advances in history, was 46%.

A 46% advance off the 2966 low basis the nearest futures would project to 4330. If we advance to that price level, the July 38 calls purchased at 60? would be in the money by 530 points and this would result in at least an 8:1 risk reward payoff.

We wrote this back in April 8th, back when the price was down here anticipating that the market would continue higher. Now we’ve pushed up as high as 4020 basis the July futures contract and if we push up to 43 which would be right in here and not too much further to go, at least relative to the move so far, those options are going to reward at least 8:1. If we continue higher from there the risk reward can become higher.

Commodity Trading Strategies – Current Soybean Option Positions

We are aggressively long for subscribers, 150% long in fact. That’s just on the options side of the equation and we do have the latitude to make partial profits but I’ve made no recommendation to do so yet.

There is a pivot at 4310. In the July soybean oil you can see that there was a low at 45, 46 on the way down. Our low was 4310 basis the nearest futures. Basis the July soybeans we noted that it was 1150. Those are important price points that technicians will be watching to see if the market can regain those lows.

We have a minor intermediate low which occurred on the way down at 4310. I believe this is a reasonable objective to the upside and coincides very closely with our original objectives for this leg up. We have an additional rationale for why this market has the potential to move higher and regain that 4310 as a minimum objective to the upside. One note here, I am cognizant of the impact a dramatic and now a projected correction in the stock market could have on the commodity market board.

I’ve made subscribers aware of this as well. Obviously when there have been these violent moves in the stock market it has had an impact on the commodity board. Also, the commodity board has had an impact on the stock market because they’ve been moving in tandem.What occurred in the soybean oil back in December is that the market established a higher bottom coincident essentially with the stock market experiencing its final bear market low.

One of the reasons that we turned so bullish in the soybean oil is that the market did not move to a new low in spite of the stock market and all the fear and panic and deflation that was taking place in equity prices.Nevertheless, by virtue of this very aggressive move in this leg up in the stock market, there will be a correction at some point in time. I am cognizant of the impact that could have in stalling out a soybean advance.

I have not projected a top for this move in the stock market. I don’t know that I’ll even be able to do that with respect to my analytical tools with respect to that, but I am cognizant of that possibility. That is, in a sense, a wrench in the works that must be at least acknowledged.

Commodity Analysis – July Soybean Oil

Lastly, in the July soybean oil, everything is tracking very well. You can see that we exceeded the January 7th high only by about $2.00 so far. It’s not like we’ve had a dramatic break out above this January high.In a previous video we had gone through these projections based upon our historic precedents showing that the advance of the January high should be at least an 18% advance above that high. Let me give you that number. That’s an important calculation and that would take us up to 45 and that was something of a minimum forecast as well.

That would stall out having exceeded that January high by just $2.00 doesn’t make any sense to me. We also have a minor pivot that occurred here which was a buy signal. No outstanding pivots till we get to the 45, 46 level. It does get very interesting.

You can see how far we have come from the ’08 high and it’s going to be very interesting to see how high this advance can carry price. Essentially a bull market in and of itself and I would expect it to fall short of retracing this entire bear market by a long shot as we saw in the soybeans the retracement on average was about 60%. That does give us room to the upside in the soybean oil as well.There is no telling what can happen. We are, in my estimation, in a bull market in overall commodity prices and they are all starting to play the game together but it can be somewhat of a choppy affair depending on what markets that you’re in, but we have targeted the soybean complex as the key complex.

The next number of days is going to be very interesting to see if the continued runaway of the soybeans continues and I will update you with regard to tracking these forecasts.

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* Please comment on the video at the bottom of the page *

Based upon the projections we made in March, the Soybeans and Soybean Oil are 75% of the way to our minimum projected top for this leg up.

An additional thrust into new highs will allow us to achieve our sought out objectives for a 10 to 1 risk/reward multiple in long call option positions.

If that projection is achieved, the next major play would be on the short side of the market.

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If you feel the research we provided in this video can help you make investment and trading decisions, take another couple minutes and subscribe to a one-month trial to one of our service packages.

Financial Forecasting Package – $47 per month (Market Coverage: S&P 500, Dow Jones, Bonds, Gold, Silver, Platinum, U.S. Dollar)

Commodity Forecasting Package – $67 per month (Market Coverage: Crude Oil, Energy Markets, CRB Index, Goldman Sachs, Soybeans, Corn, Wheat, Cotton, Sugar, Coffee)

Complete Forecasting Package (Financial & Commodity Markets) – $97 per month (Market Coverage: S&P 500, Dow Jones, Bonds, Gold, Silver, Platinum, U.S. Dollar, Crude Oil, Energy Markets, CRB Index, Goldman Sachs, Soybeans, Corn, Wheat, Cotton, Sugar, Coffee)

Key Observations of Recent Trade Action in the Soybean Market

Thus far we have two measured corrections, two sell-offs; the first one , and the second 8.4% in six days.

Soybeans are really what I would call a classic market during very aggressive advances for experiencing minor corrections,  so we can be assured this 975¼ is a very key low which I believe at this point does need to hold, absolutely needs to hold, if we are in as aggressive of a position as I hope we are. That does remain to be seen.

The next favorable indication is that there was a minor buy signal on the break of the 978¼ low followed by the reversal higher. You can see that as of April 8th, we declined to 978¼. We just clipped that low by 3¢ the other day without follow through to the downside.

In light of the reversal to the upside that is a very good sign. It means that essentially there was a stop raid beneath that low which was followed by an immediate reversal. That’s always a good indication, particularly as I say here, very impressive reversal on Wednesday, April 29th with follow through today, the 30th.

We’ve got this follow through to the upside, and needless to say the shorts have a lot to think about at this point in time with respect to the implications should we exceed that 1076 high.

Looking at the July soybean oil, a number of observations. A break beneath 34.71 with follow through to the downside in the pit session would be problematic for our bullish stance in our long positions that we currently hold for subscribers.

If we are to replicate the more aggressive of our projections, I believe we must move higher from here. I like how we’re situated. Soybean oil is not experiencing the kind of percentage advance that we have in the soybeans over the last three to four days so in my estimation it will be playing catch-up.

As in the July contract in the soybeans, you can see that we have this lower top in the soybean oil so there is going to be a very significant number of buy stops building above that level.

Since I believe that we’re in a bull market in the soybean complex, I expect that those stops are going to be hit en route to a continued advance in what is a second leg up in a bull; the first leg up being off the December low, second leg off this March 16th low.

Dropping down to our next observation. The soybeans fractionally broke beneath the equivalent of the 34.71 low so that in the previous chart we broke this 978¼ in the soybeans, but you can see in the soybean oil we made a slightly higher bottom by .16 so we did not run the stops there.

If we were to break that 34.71 that would be problematic but I believe this is a bullish sign overall in taking these two contracts – the July contract in the soybean oil and the July contract in the soybeans – taking them in tandem. I like the near term trade here.

Looking at the nearest futures in the soybeans, these were our four closest fit projections in history; the primary one being the 60-year cycle in 1949. We dipped down to what would be the angles of ascent during 1978 and 2005. This surge is likely going to carry us higher if we’re right in the market so that we can track this 1949 market.

We have long July call option positions in the soybean oil which expire almost exactly when the projected 1949 advance would be complete. You can see how far we have gotten so far, and if we were to replicate this 1949 advance then we would have significantly further to go to the upside.

Is that going to happen? I don’t know but we’re still very early in terms of the time period of this leg up. Legs up do not complete in this as abbreviated of a time period as we’ve experienced so far to the upside.

I like our prospects to the upside. I like the technical condition of the market.

In the soybean oil, as a result of this recent sell-off we can dismiss the 1976 precedent as the precedent which is going to dictate trade.

The 1949, I experienced a comparable percentage advance. It was up 61%, it just took a longer period of time, but as I mentioned, since we’re holding call options, the 1949 market would top out, let’s say here. The same price objective as the 1976, actually a little bit more, but there is still the time left in our options.

If we were to see, for example, the July soybean oil advance to 46.00 then we would be experiencing a 12:1 risk/reward on our long positions that we’ve recommended for subscribers.

We’re also long futures positions and have a pretty significant position overall in this market so I believe that is justified. We’ve been adding two profitable positions, adding on the way up. At the end of this move it is going to be very interesting.

There is also going to be opportunity on the other side of the mountain. There is a lot of research that we’ll be giving subscribers with respect to that, as well.

I really like the prospects of this market particularly in light of the last couple of days of trade.

* Please comment on the video at the bottom of the page *

In light of the dramatic reversal higher on April 29th and 30th after experiencing a measured correction, the Soybeans continue to replicate the price curve which occurred during the 60-year cycle in 1949.

In this video, we look at the geometry of the current advance and the probability price will advance to the 1350 level before the current leg up is complete.

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In looking at the nearest futures chart in the soybeans, this is the daily chart, you’ll notice, if you’ve seen our previous videos, that we have four historic precedents which were our closest fitting precedents as far as this overall pattern is concerned.

If you’ve not seen any of our previous videos I recommend that you go back to some of the previous videos over the last week-and-a-half, to get up to speed on what exactly we have been saying.

This is a drama that is unfolding and I’m giving you new information that will build on that foundation.

We have four precedents, but you’ll notice  (see the video) that the 1949 angle of ascent I have adjusted to a more acute angle. In other words, a more aggressive potential move up in our market.

The velocity, or rate of gain in the soybeans is following the 1974 and 1949 markets. The 2005 and 1978 markets were more subdued in terms of advances.

With respect to 1949 I’ve adjusted the angle of ascent to reflect the revised May 1949 low as the starting point in the cash advance. This provides additional weight to a potentially more aggressive advance in line with the 1974 precedent.

I’m going to look at the charts and tell you why I’ve adjusted this angle as being more acute. I’m going to be going through my reasoning there as we get through this video.

The other thing I want to point out before getting there is that in 1976, we’ve pointed that out as one of the key closest fits in soybean oil and at the same time that soybean oil was experiencing a very significant advance in 1976, the soybeans also advanced 60% in tandem with the bean oil.

If we have the soybeans and bean oil following the DNA of the 1976 market then that is also an aggressive count for us.

This is a cash chart of the soybeans. I’ve not shown this recently but I want to point out that the cash price has exceeded the January 9th high by 31½¢. Unlike the futures this was a decisive breakout so as we drop down to the futures in the May contract we only exceeded the highs by four cents whereas in the cash we exceeded it by 31½¢.

The odds are favoring that we are in a second leg up in a bull market, and this is a very shallow second leg by any measure as far as historic legs up are concerned. We would not expect this second leg to be complete.

In the soybean oil, to reiterate, we have not exceeded that January high so we are still awaiting that confirmation of the breakout in the soybeans; On April 22 I stated “The probability for the bean oil following the 1976 vs. 1978 precedent was perhaps 50%,” so we felt that it would either follow this angle of ascent or this angle of ascent and that would have dramatic implications on our long call option positions.

In light of our more refined research I’ve now replaced this at 65/35 so what I will be going through in this update has increased the probability that we’re going to follow this more acute angle. This weighs the odds more favorably toward our greater profit objectives.

In looking at the soybeans, before I look at the May soybean oil, we do have six price patterns that result in actual specific trade recommendations.

We’re in the process where we could experience a buy signal in the soybeans based upon what we call Profit Center #4 which is a breakout retracement. I’m not going to go into the details of that right now but that is something that we apprise our subscribers of with regard to specifics of buy recommendations.

In looking at the May soybeans, I want to note the April 18th comment that I made the day after the April 17th high. I said we ran the buy stops above the January high at 1269, that was the January 12th, followed by an immediate reversal lower, given the overbuy condition of the market this is not surprising.

Technically, it would be ideal to experience a minor correction of perhaps 6% at this point in time and that would result in a decline of 64¢ to 1009. I’m not saying that this is going to happen, only that if it does it would be healthy in correcting the overbought condition.

At the same time, it would in no way disqualify us from potentially being in a very strong position with an expectation for a continued runaway advance.

As it turns out we did drop down to 1012¾ experiencing a two-day 5.7% decline so we may have experienced the completion of a minor correction followed by a resumption of the uptrend.

An advance to the new high above 1073 would issue a number for breakout retracement buy signal. If we are in the midst of a classic runaway advance this could result in immediate follow through to the upside. Regardless, it would be a very favorable sign for the market especially if the bean oil confirms the breakout.

We are very aggressively long and in profitable positions in the soybean oil futures and call option positions. By virtue of the extent of this advance we are not looking to add to positions on the basis of this buy signal because we are in the midst of this leg up.

When we are making purchases we want to buy close to the turning point, close to the lows, which is what we did. We do add to positions on the way up, and we have, but now the leg up is maturing and while this buy signal may generate a profitable trade, we basically have the boats loaded as far as our overall position is concerned.

In dropping down to the May bean oil, again, we haven’t exceeded the January 7th high. I say this, in runaway legs up in bull markets the minor corrections typically last between one and four days. If we advance to a new high for the move we would continue to conform to historic runaway moves to the upside.

In the soybeans we experienced a two-day selloff; in the soybean oil a three-day sell off, and it’s going to be interesting to see if we experience this breakout above what is a minor double-top high at this point in time.

We are conforming to what would be a classic pattern of a runaway advance. As long as they continue to conform to that then we are potentially in a very strong position. But if we see the market sell-off and decline into the 5th or 6th day, in other words, if we were to decline beneath this 35.23 at this point in time, before exceeding the 37.37 the probabilities would diminish that we are in as aggressive of a position in the market as I hope that we are.

I want to give you the rationale and give you the update on the 1949 market because that is the 60-year cycle. You’ll note here that these are the four closest precedents in history to our market because each of these advances came on the heels of the greatest deflationary declines in history in soybeans since 1915.

Ours being in that category. Our market fits the DNA of these markets. In 1949, this is the most important date to consider because it’s a 60-year cycle, master time factor cycle.

If you haven’t gone on our Web site and looked at the Essential Course in the Master Time Factor, I want to encourage you to do so. This is a very key element to what we do.

The market is following incredibly, and it’s remarkable how closely our market is following the 1948 precedent. Overall commodity prices, there was a boom and bust cycle at that point in time and that is what we’ve experienced in commodity prices ourselves, and almost on the exact same dates 60 years after the 1948-49 precedent.

This is a very key precedent for us and what we have here is the adjusted angle of ascent, from May 31, 1949 to August 25, 1949 we advanced 62% in three months and 23 days. That is a very aggressive move.

This is the cash price in the soybeans back in 1949 into the high on August 25, 1949. It’s important that I tell that the high for soybeans was made at 441 in 1948, then we saw this huge decline – I should have shown this chart to you – into what was a major low on February 8, 1949.

From there the market experienced this zigzag pattern and on May 31st the market ran away.

In our research these declines here, which were obviously corrections in what was a rather short-lived run to the upside to the 1949 high, these were minor corrections but they didn’t last as long as a month. Classically a correction has to last at least a month to be catalogued as a genuine correction.

I believe under the circumstances, because of the zigzag pattern, that it is valid for us to make the projections in our market for this advance off the May 31st, which was the 3rd higher bottom, as opposed to making our projections off the February 8th low into the August 25th high.

The bottom line is that if we expect our market to advance similarly off our recent low in March 6th off a similar low of February 8th then obviously the angle of ascent is going to be less than the angle of ascent than if we had made our calculations off the May 31st low to the August 1949 high.

What I did in looking back at the soybeans is, we had had an angle of ascent in 1949 on our soybean projections that basically projected out to here; the angle moved out to here. You can look at our previous videos and see that because we were making the projection off the February low into the final high.

Now we’ve adjusted that from the May low which means that I believe we’re in a very aggressive position. By the way, that is a very valid calculation. Sometimes we miss things until we dig in and look at it again and say, “Hey, wait a minute.”

As in 1949, if we put this as the equivalent February low and then we saw the zigzag in 1949 to the higher bottom, and then the aggressive move like 1949, that’s where we get that calculation.

It is valid, I believe. It reflects a valid interpretation of the price pattern and that there needs to be work done at the lows. Once the work was done and the higher bottom was in place, off she went in 1949.

That is one of the reasons that I’m more bullish today than I was several days ago. Does that mean that this is going to play out according to plan? That I don’t know but I like the odds.

It’s always probabilities and odds. It is a 65% probability that we’re going to be the more aggressive, and 35% probability that we’re going to be the less aggressive. That’s assuming that we’re going to move up which I believe we are going to continue to do.

In looking at the 1973 & 1974, I wanted to show you the patterns because these are the patterns we experienced after the implosion in price, the bust. We experienced a rather modest advance off the 1973 lows, secondary decline into a higher bottom in 1974, and then we saw this run to the upside.

That’s one of our precedents. We expect that our market is in a similar position as occurred after the May 6, 1974 low. Same as the case in 1978; implosion in price and one of the great deflations in the history of the soybean market. The initial modest advance, secondary correction, we should be in this leg to the upside based upon the 1977-78 precedent.

Lastly, looking at the 2005 precedent, here again, price implosion, modest advance, secondary correction, and then we saw this very quick surge into the 2005 high, and ultimately into the June 24th high.

This is the pattern that appears to be playing out in our market and it’s been incredibly close ever since the lows were established in December. We’ve been looking at these patterns and they have accommodated us very well.

We would expect that based upon that the market is going to continue to conform to these patterns, and if it does so we are holding call option positions which should yield a 10:1 risk/reward in the July options. That is if we have the more aggressive of our projections.

The less aggressive is going to be about a 2½ to 3 times risk/reward which is credible but obviously we’re keeping our fingers crossed for the 10:1. That would be a home run situation.

* Please comment on the video at the bottom of the page *

The soybean oil nearest futures chart shows a recent advance  into the April 16th high of 37.37. This advance fell just short of the January 7th high of 37.55.

One of the observations that we’ve had with this market is that the ideal was that we would follow this 1976 precedent, and if so, the market would experience a very dramatic advance. In this case, in 1976 it was a 57% advance in one month and 22 days.

The DNA in our market is startling in how close it is to this particular precedent, but the 1978 precedent must also be given weight as a possibility.

Subscribers Participating in Profitable Options Positions

You can see that the angle of ascent is much less in 1978. Our subscribers have long call option positions in the July soybean call options which have more than doubled, they’re up about 150% from where we entered back in late March.

However, in terms of risk/reward, if we were to replicate this 1976 advance and basing it on the recent highs we experienced about halfway to that destination site, then those options are going to result in risk/rewards of at least 10:1 to 11:1 and that is, needless to say, the type of option play, I hope as a listener that that is the type of option play that really makes sense when you have that kind of a prospect for that kind of return.

We did have that going in, so the market has been following this 1976 ideally precedent, or 1978, but we have yet to see what the tail of the tape is going to be in the end.

Current observation here: in looking at this prospective leg up, we have what we believe is a first leg up into the January high, a correction, and this has started a second leg up in a bull market.

As I’ve mentioned in previous reports, we have all ready exceeded this January high in the soybeans so we are anticipating that the soybeans are going to follow suit.

In looking at legs up in the history if the soybeans, this is what we observe. If this is a second leg up in a bull market, a current advance into the April 16th high is very young.

At one month, zero days, it ranks as the 45th shortest out of 47 legs up since futures trading began in 1951. In other words, there have only been two legs; only four percent of the time have there ever been legs that are shorter than this. The probability is greatly in favor that we have not run out time to the upside and that we are going to continue higher if this is a second leg up.

In looking at the 1976 precedent, the actual chart of the 1976 July soybean oil (see video) the contract move was 54% in one month and 21 days. You can see what the angle of ascent was when it finally topped out on July 15th.

This represents the angle of ascent on our chart, so we move from this chart and actually go ahead and put it right on our daily chart (see video).

The contract move was 53%. The nearest futures move 57%, and the contract 53%.

You can see that the market, at times, was above the angle of ascent and dipped below it, rallied to it, significant dip below it, stayed under it, but then finally did culminate on July 15th (see the chart in the video).

We are beneath this angle of ascent right now and it remains to be seen whether we are going to play catch up and move up to this angle.

You can see (in the video) the ascent is very steep so we would have to play some significant catch up here, and when you have a move up of 57% one month, 22 days, that lends itself perfectly to call option positions which are a wasting asset because of the time frame.

We have our expiration dates on this July option out to June 26th so we have plenty of time for this particular scenario to play out.

Patterns of Bull Market Corrections

The other thing that I’ll just point out quickly on this chart is you can see there were minor corrections. This was a very aggressive move but very significant minor corrections, and that is even in the most aggressive bull markets in any commodity. These are really pretty standard type moves.

The first minor decline was 7.9% in four days. We had a 12% decline in three days and that is a little more significant than is typical during aggressive moves like that, like this particular move.

In June to July 1st we had a three day move, and then a single day move before the push to final tops. The reason I bring that out is in runaway configurations markets, and we’ve looked at every runaway in history in the soybeans, and what we do know is that approximately 95% of the minor corrections during runaway advances, and I believe there has been about 36 minor corrections since 1936, 95% of them do not exceed 8%.

This is actually an aberration to have 12%, but typically they run between five and eight percent. That would be very typical. That would set some kind of expectation for us in our market.

Will Soybean Oil Low Hold?

In looking at the May soybean oil, during this run up we did experience a 204 point correction which was six percent, and into today, Tuesday, we declined 214 points on the electronic session which is 5.8% so we have a couple of minor corrections here.

Is this low in the bean oil going to hold? That’s going to be what we are going to find out in the next couple of days. Actually, this is the 3rd day off the high so the 4th day would be Wednesday and that would be the limit of what one would expect if we were going to be in a very aggressive position.

In terms of at least a minor signal, I’d have to say that if we drop below the day’s lows, drop into the 34 range after the 4th day, then evidence is going to start to weigh that we may be following the 1978 precedent in that angle of ascent.

Here are a couple of the observations that I want to make. Unlike the May soybeans, we did not exceed the January 7th high.

I don’t view this bearish divergence as negative over the intermediate term, although over the next several trading days it could indicate that we will see a continued minor correction of approximately 6%.

That was on the 18th, so we were expecting the possibility of replicating this 6% correction, and in fact, we almost did that, 5.8%.

If this takes place there will be even more buy stops building above what would then be even greater overhead resistance above the highs at 37.81 and 37.37, we’ll have a “double-top” and there are going to be stops building above that level.

Over this last week the crude oil during this move down has declined 20% since March 26th. In the face of this the soybean complex has been holding up remarkably well so I do view that as a positive.

New Highs Breaking Out Above Double Top Would Signal Confirmation of Bull Market

The 1976 I mentioned, longest minor correction was four trading days so we’ll see if we hold to that pattern and not exceed four days from any high for the move.

Given the current minor correction off the 37.37 high, there will be a greater number of buy stops building above the “double-top.”

I believe an advance above these highs will result in a dramatic confirmation we are in a second leg up in an overall bull market. Let me add, I believe that that would indicate that the probabilities would increase even more that we are in a very strong position in this market.

If all we are able to muster is a minor correction followed by a push into new highs above this “double-top,” I believe that that is going to indicate that the market is in a very strong position.

Now, in the soybeans – this is the May contract – we exceeded the January high at 1069 rallying to 1073 so we ran buy stops above the highs. Those would have been those that were short the market and obviously, when you see old highs exceeded on the order of this January 2nd high you can always be assured that there is a significant number of buy stops for those that are on the short side and are losing money and cover their short positions on the rally to new highs.

Also, there are those that buy breakouts into new highs, this would be technicians, and in this case this was a bull trap by pushing into new highs and then immediately reversing lower.

As of today’s trade we did decline on the evening session to 1012 to the downside. If we reassert ourselves and press above the 1073 having all ready exceeded the January 12th high one time, a second time into new highs is going to be a very favorable indication for more upside.

We should, in the next several days, see whatever evidence we need as to whether this is going to continue to conform to 1976 or a more modest 1978.

If the 1978 precedent plays out, then in our options positions we’re going to see maybe about 2 ½ times on our initial premium that we had purchased on the options. That’s not a bad return. It’s not a homerun situation like an 11:1 that I’m hoping will take place.

I’d say we probably have a 50/50 probability either way. Fifty percent probability to be either following the 1976, or 50% following the 1978. Frankly, I just don’t know which one it is going to follow but the prospect of following 1976 is very exciting.