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An ideal price pattern has developed in the Soybeans which has opened the door to potential short positions.

This pattern is very similar to what took place in the September S&P 500 (Stock Market), prior to last Thursday’s dramatic sell-off.  If the Soybeans follow suit relative to what has taken place in Crude Oil and the September S&P 500, price is very vulnerable at this time.

In this video, I show the factors I believe add up to the likelihood of a sharp sell-off in a short period of time.

Risk-Free Subscription Package Options

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.

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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 have been able to get a jump on this market in terms of participating in the current opportunity via futures and options. This video will fill you in with regard to the historic context in which this market is trading, based on our research.

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Current Research and Forecast for Soybeans and Soybean Oil Futures

The recent move down in soybeans was one of the greatest legs down in the history in the soybeans since 1936. There are five other markets over that course of time, approximately 70 years, which had similar price implosions to the one we’ve seen recently in our market.

The current action in Soybeans very much rhymes with history and what took place during those five implosions.   I want to go through some of the observations that I have with respect to what is taking place now.

First of all, I believe the prospects are very high that the December 2008 low did complete a bear market. We experienced a first leg up into the January 12th high and a secondary decline. We also experienced a bull market correction into the March 2nd low. From there we have seen the market push up to as high as approximately 1011, as of Wednesday, April 8th.

Soybean Market 1019 February High

So, we’re not far from the 1019 February high. The high for the move in the pit session on Wednesday April 8 was 1046 ½, so we’re knocking on the door to the possibility of confirming the overall bull market.

Of the five “closest fit” precedents, only the 1975 market continued lower in a continued bear market. In other words, after we experienced these implosions, historically, four out of the five started bull markets after that, and only one of the five continued lower and that was the 1975 market. In other words, in four precedents we were on the bull side of the market cycle at this point in time.

I really like our prospects on the long side of the soybean complex. We are all ready positioned in these markets so I’m not suggesting you just jump in there at this point, but you are going to be able to follow along with respect to what is taking place.

The closest fit, I believe, is the 1977-1978 market.

In three of the four bull market precedents (1977-1978.1949, 1978, and 2005 ), the three I have displayed in the chart (see video), followed almost the exact angle of ascents. So there are actually three angles that are advancing side-by-side. That’s very interesting.

In other words, the DNA in our market closely represents three of the five historic precedents. Once the comparable low to March 2nd was established, the legs up were almost exact in terms of velocity of advance – overall percentage advance per day which we say is the angle of ascent.

This is very interesting and would suggest that the soybeans could very well follow this angle of ascent. If that’s true then we’re a little bit overbought here. That also occurred when we first hit 981 ¼. We retraced back to this leg.

Can we see some backing and filling? Certainly we can, but all of these three were bull market legs.

In looking at the soybean cash, the 1977-78 market (see chart in the video) is the closest fit.

Let’s look at how this played out in ’77. There was a huge implosion in price, almost exactly the same percentage decline as our market. This was followed by an initial flurry to the upside lasting one month and eight days. The recent advance in Soybeans was one month and four days.

The backing and filling demonstrated by the 1977-’78 bull market correction was rather modest. We’ve experienced a backing and filling in our market, and then we started the next leg up and it’s very possible that we could parrot this 1977-78 market which continued into a bull market.

Live Trade in Soybean Oil for Current Subscribers

Soybean oil is the market that Gann Global Market Forecasting Service Subscribers are positioned in. We’re long the July call options in the soybean oil long the 34, 36, and 38 for subscribers, long the 38s for an average of 60 points.

Those options have gone from an average entry price of 60 to the close today (April at 120. So we’ve almost doubled those options in price. Obviously this market moving up very aggressively as the soybeans are.

Historic Market Forecasting Benchmarks

Let’s go through a couple of the historic benchmarks for what to expect during a leg up in the soybean oil.

Our assumption is this implosion completed the bear market first leg up secondary correction, and that we are in the midst of what will be a second leg up in a bull market. This would be confirmed by a rally over the January 7th high, so we have a ways to go there.

We closed at 3499 today, Wednesday, April 8th so we’re still about 250 points away from that high.

If this is a second leg up in a bull market, the current advance into the April 6th high is very young. The low from March 16th to the April 6th current high is 26 days. At 26 days it ranks as the 46th shortest out of 47 legs up since futures trading began in 1951.

If this is a bull leg you would not expect it to be complete in just 26 days, so presumably we are early on in this leg up. That is, if we’re correct that the trend is up and this is a leg up in a bull market.

As far as the time period of legs, this is what history tells us with respect to that. The medium leg up is three months and 23 days. When you look at the 46 legs up in history, the mid-point of those 46 legs, or average, is three months and 23 days.

(See chart in the video) The diamond point represents three months and 23 days from the low. The average leg up in a bull market would move from March 16th until approximately the second week of July.

This isn’t a projection in terms of price. Our projections are actually incorporated in two closest fits, and we have blanked that out (see chart in video) for this complimentary video…subscribers would receive the projections.

We know, based on time, a typical leg up in Soybean Oil lasts three months and 23 days so that is a good benchmark for us.

Our July call options expire on May 16th. That’s not too far off of what would be the average leg up. That obviously plays in on options where you need to have enough time in terms of what we purchased to hold those long call options positions.

Additional information: only eight of 46, that’s 17% of the legs up in history in soybeans were one month and 23 days or less. We’re only in the 26th day and only 17% were complete in one month and 23 days.

Twenty-three of 46 lasted between two months and three days to four months and 24 days. We show that up here in this bar. We start here towards the middle of May and go until about the end of the first week of August, and that means that half of all the bull market legs in history in soybean oil would be complete in the time band shown in the video.

We expect Soybean Oil to continue higher into the middle of May. That means we have plenty of time to see up that upside and the probabilities would favor more upside if this is a leg up.

This is a very comforting benchmark.  We are in the early stages of what should be a leg up in a bull market, and we want subscribers to our Forecasting Services to be patient in holding long positions at this point in time.”

In terms of percentage moves during legs up, the median percentage advance was 46%. As we look at all 46 advances, the median advance is 46% percent and 46% off 2966, which is the low here, would project a 4330, so somewhere in this vicinity.

As far as the closest fits, it remains to be seen if we follow the 1976, 1978, or neither precedent. This is the 1976 precedent here, and this is the 1978 precedent here. I don’t have the culmination prices and dates on the chart (see video). That’s reserved for our subscribers, but those are precedents are being studied by our research team very closely.

The ’78 precedent was much more modest and would project a modest 2:1 risk reward on our 38 July call options, whereas the ’76 we could see upwards of an 11:1 risk reward in our call options and that is if we don’t do anything else from this point in time.

Subscribers are situated very nicely, I believe, to profit. The only question is, to what extent that profit will be.

In looking at the soybean oil, this was the 1976-77 precedent (see chart in video). There was a minor spike off the lows into March 9th, backing and filling, and then the market surging higher into what would be a July 14th high in the market.

We’re looking at these patterns; this DNA, in our market, matching them against history; the psychology, the technical analysis, the patterns, and the formations, all play into forecasting this market.

The Soybeans and the Soybean oil are tracking each other very closely in terms of percentage advances, although the soybeans is showing a little bit more strength. It’s good that both of these markets are advancing basically in tandem. They both have advanced about 18%.

Undoubtedly a significant number of buy stops are building above the 1024 high. It will be interesting to see what happens once these stops are hit.

We fully expect that the buy stops are going to hit above 1024. Those people on the short side of the market are obviously very much on the defensive and on the run.

The crop report that came out this last week-and-a-half has caused a surge up in price. The major landmark high is at 1069. It is going to be a interesting if we exceed that high.

Obviously there can be some backing and filling. We don’t expect Soybean Oil to go straight up. It can rally above the 1024 and then experience a correction beneath the 1024 before resuming the uptrend.

In addition, we see the shorts are obviously being pushed to the wall, covering short positions. The follow through in trade action is going to give us our next bit of information and evidence as to just how strong a position the soybean complex is in.

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

Soybean Complex  Analysis

Current trade action in the Soybean Oil is tracking the angle of ascent of the aggressive 1976 precedent. Hopefully that’s how things continue to play out. Of course we don’t know that but that would be a home run situation for subscribers..

If we were to replicate this advance, the 38 July call options would advance from our average entry price at 60 points to at least 800 points, which would be a 12:1 risk/reward. The 34′s would probably be in the neighborhood of 9:1 risk/reward. The 36′s, I think 11:1, and the 38′s would be the greatest risk/reward but obviously there is a long way to go, but so far so good.

Currently the value of the options is approximately a 135% advance from where we entered.

As far as the May futures contract, I’m watching the relative strength in the soybean oil relative to the soybeans and the soybean meal. After lagging both the soybeans and the soybean meal, soybean oil is actually up 18% off the 2966 low, soybeans 17% off the low, and soybean meal 15%.

I view this as a favorable development. One of the reasons I’m more bullish on the Soybean Oil  is that it was more over sold than either soybean meal or the soybeans.

Soybeans topped out in March of last year, as compared to the Soybean Meal and Bean oil which topped out in June or July.

Actually, into this December 5, 2009 low, that was the completion of a second leg down in a bear market. We’ve spent more time on the bear side of the equation on the soybean oil than we have in either the meal or the soybeans. By virtue of that, that is one of the factors that I felt would, as a result of the law of action and reaction, favor the soybean oil over the other two markets.

On a short term basis though, Soybean oil pushed above a recent minor high and is showing relative strength to the other markets is very favorable.

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1976 Precedent Appears to be the Closest Fit to Our Market

The decline which we experienced in our market between June 16th of last year and the low on December 5th was the greatest leg down in history in the soybean oil. That’s going back to 1949. Futures actually started in 1950. That particular leg was a 59% decline in five months and 19 days.

It’s a very unique situation as far as a very elite move to the downside; in tandem, of course, with the huge deflation in the energy complex, the stock market, and everything across the market.

In looking at the other precedents in history, the second greatest decline in history was the decline in 1976, where the market declined 55%, also in five months and 19 days. In terms of the time period of the decline, our decline was exactly the same as the 1976 precedent.

Once the low was in place, specifically in 1973, 1977, and 1976 – as the three greatest legs to the downside, along with our leg which would make the four greatest legs down in approximately 60 years of trade.

In looking at our final low on December 5th, we experienced a one-month-and-two-day advance of 33% into the January 7th high. In 1976, we advanced 17% – a much more modest advance – in one month and 12 days; within two days of the advance that we saw into January 7th.

In the aftermath of that, we’d expected that if the market experienced a decline and ideally held the December 5th low – and it could very well be a final low, a bear market low – then it would be conforming to the pattern in both 1976 and 1977, and that could set the stage for a trade action.

That’s exactly what occurred as the market off the January 7th high…. We show this decline here: minus 21% in two months and nine days. In 1976 the decline was 12% in two months and 12 days. Therefore, we are very close to replicating within a couple of days what was that decline in 1976.

July of 1976 contract: This was the historic leg down basis the actual contract. We saw this rally made a high on March 9th and then retrace to 1568 on May 24th. It established a higher bottom.

Then, very volatile, choppy trade to the upside, but basis the contract, up 53% in one month and 21 days. It was a very significant rally, but it was quite a wild ride. You can see it running up to 1931, down to 17, back to 2040, down to 1915. This would have been during the growing season, which can be a day-to-day type of situation.

At any rate, we’ve hit our target zone at 2966, which is a slightly higher bottom above the December 5th low. As a result of that, we’ve entered long call-option positions.

We also have the 1978 precedent, which wasn’t as bullish in terms of the velocity of the advance; but did experience a 48% advance, which was a greater length in terms of the time period of the advance. We’ll see if our market follows two of the three precedents in the aftermath of the greatest legs down in history. I really like how this is set up.

I do note here, though, the differences between our market and what occurred, for example, in 1976. One is the seasonal: that the advance occurred closer to the July time-frame, which is really when weather considerations are much more acute. We are earlier in the season, so I need to make a mental note on that.

Additionally, we did not experience the kind of deflation that we’ve experienced in our market. We were not going through this financial conflagration that we have experienced.

That was one of the concerns I had with expecting this forecast to play out. It was the question as to whether the stock market would continue to deflate, which would reflect negatively on commodities.

However, I was able to dismiss that possibility, based upon how resilient the soybean oil was during this last leg down in the S&P 500. We declined 29% in the S&P. As a result, we did experience a deflationary move in the soybean oil, but we actually made a higher bottom.

Everything has really come into play very nicely, I believe: the psychology of the market, the historic precedents, and geometry based upon the 1976 market, if it were to play out like 1976, again, the options that we’re looking at would be up 10:1 to 12:1. I’m not saying that that’s going to happen, but that would be the prospect.

July soybean oil : This is the contract on which we have the call-option positions. We have moved to 150% long; in other words, 150% of which you would normally risk on a trade. The average prices that we have bought in on the July 34s, approximately 127; on the 36s, 85; and on the 38s, 59.

As of Friday, as a result of the strength that we’ve experienced over the last number of days, this option closed at 171½, 115½, and 75; so we’ve got a start. Of course, this is just going to be dependent upon whether this market continues higher; but I like our chances.

Here’s the other comment with regard to the technical position of the market. We did get a pivot reversal signal – a bi-signal – on the break as the market put this 30.26 low in. Then we saw a few weeks of a trading range activity, and then ran those lows the last week and a half.

We can assure that there were sell stops underneath there. They broke the lows by 26 points, but have immediately reversed to the upside. That is a bi-signal that’s been generated.

Now, if we break the recent low at 30, we would experience a price failure – basically, a bi-signal failure – in addition to the market potentially divorcing itself from the 1976-1977 historic precedent.

If this happens, I will be recommending exiting at least partial positions and likely all of the call-option positions. However, I view this as an ideal option scenario. It’s now or never. If I’m wrong, we should be able to exit the options at a point where they still have value.

In recommending the 150% longs in anticipation, the options would likely decline in value no more than 66% from our average entry prices. In other words, we have, in my estimation – or the ideal, I should say, in expectation because it is an expectation. You don’t know because of the volatility. One hundred percent would have been where we risked the maximum amount that we do on a trade, except under unusual situations.

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

I want to point out a number of things here. We had mentioned back on February 24th that the soybean complex held its own in spite of continued weakness in the stock market, that would be an indication that the market was in a strong position and that has been borne out.

Also, sometime back we had pointed out the 60-year cycle, which is the most important inflationary cycle that we’re looking at right now and has the potential for turning commodity prices higher, that was the shortest lived historic deflationary move in history.

Based upon that 60-year cycle, that was one of the cycles that put us short back in July of last year. The final bottom basis that 60-year cycle was as of February 9th, suggests we would have bottomed as of February 9th, but the time period based upon the 60-year cycle in the soybeans would have bottomed as of March 2nd which was exactly our low in the soybeans. That is very interesting that that time period came in right on target.

In looking at that 60-year cycle, the ascent which took place once the final low was in place; the leg up which took place in the soybeans during 1949 into July of 1949 suggests we basically are running really hot to the upside. But based upon an average overall ascent during the 60-year cycle, this would be the progress that we would expect in our market.

Now, dropping down in the soybean oil, we have felt that this market was in a stronger position than the soybeans. It topped out in March of 2008 whereas the soybeans didn’t top out until June, so we actually established a lower top in soybeans so the overall bear market is more mature.

You can see this 1976 precedent bottomed within one day of our low. The ’76 precedent bottomed as of March 17th. Our low at 2966 this past week established its low on March 16th, within one day.

In both these, the soybeans and the soybean oil, we have some bullish cycles which have now come into play.

In looking at our call options positions, obviously, a very favorable session today in the soybean oil. The July options expire on June 26th so these are the options that we’re holding.

If we were to replicate the 1978 advance, again, we would see the market push up the $46 level. Following the 1976 precedent would mean prices would go up towards the $46 level. We have plenty of time on these options to see this borne out. These were very significant moves, 57% and 48%.

If we have the same DNA and we’ve demonstrated it up until right into this buy signal, then we would expect to see this market experience, that kind of percentage of gain, and the possibility would be to see these options increase 10 to 12 fold.

We will likely look to take profits before, on partial positions, anyway, we would like to take profits on the way up but the prospect is for a real home run situation there.

I like how everything is playing out as far as the soybean complex is concerned.

We pushed into a high here as of yesterday, Monday, a reversal with a dramatic sell-off as of today down to 976. We expect to see a leg down into the blue target zone, and then a leg to the upside. So I believe that we do have an intermediate top in place on the soybeans, and dropping down to the March soybeans, this is the pit session chart, not the electronic session.

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

You can see that our high that we established yesterday, Monday, actually clipped the high for the move and immediately reversed to the downside. I believe that they ran a significant number of buy stops above the market without follow-through to the upside. The reversal is bearish, so we are in the timeframe before the start of this decline to the downside.

If we can hit into the blue target zone on Figure 1, which would occur no sooner than the middle of March, we would then be looking at a potential significant leg to the upside from there. That is definitely something that we’re looking at.