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As discussed in Tuesday night’s webinar, I have our subscribers on “Red Alert” for potential aggressive trade recommendations.

In today’s trade (Wednesday), the soybeans, soybean oil and wheat achieved their target zones to the downside.  In this subscriber caliber video, I give specific trade recommendations in the March soybean oil and February gold. If the soybean oil trade were to perform as projected, the risk/reward would be approximately 20 to 1. For over two months, we have been stalking this market in the hope this type of opportunity would be made available.  Our wishes have been accommodated.

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One hundred and fifty percent long crude oil positions, those options have just about doubled in price and that market has, in seven days, declined 20%. Seven trading days. The velocity of the move has been quite astounding.

The August beans, now half of our positions are short, half are short the August meal, and the expectation is the meal should be the weaker of the two in that it is in the most overbought position. In shorts from 11.28 in the August soybeans, we closed on Friday at 10.44, and the August meal on shorts from 340 we continue to hold those positions as well.

We should be in great shape as far as the overall cycle in the soybeans being short. Now, in this chart, what I have is the crude oil nearest futures contract and the bull market that led to the 2008 high. I’ve shown this chart before, but I’m going to give you some projections here.

The bull market in the 2008 high is obviously one of the great inflation rate bull markets in history and was led by the energy complex, the crude oil advancing over 1,000% in price. We know from history that every bull market that has experienced that type of a percentage advance has always been followed by a bear market on the order of what we experienced.

It was no mystery, this bear market unfolding to the downside like this, down 78% in five months, nine days. By the law of action and reaction, the bigger the bull, the bigger the bear. We of course saw that in the tech sector into the blow off advance into the 2000 high in the Nasdaq. The greatest bull market in stock market history being followed by a 78% decline in the Nasdaq.

This is what happens when markets become extremely overbought. Once the low wasn’t in the crude oil, we looked at the other great inflationary bull markets and wipeout bust cycles in history. The cotton market in 1964 was the leading commodity in terms of the advance into the Civil War inflationary bull market.

Once that market established the final top, experienced a crash in price as we did, there was a huge advance. It was a bear market rally in the cotton into what would have been the equivalent of about $55 in the crude oil, so we are looking at the rallies that took place after these great bulls followed by historic bear markets to get a read.

Trade Action in Crude Oil and What it Means

We’d had this in advance of this rally in the crude oil, so it’s no mystery why we would experience this rally of the magnitude that we have in the crude oil. The silver, this was the advance. The cotton in 1920, this was the advance. The sugar in 1974 led the agricultural markets higher, this was the advance.

Very significant percentage moves to the upside. This overall advance in the crude oil, 136%, is an incredible move in a relatively short period of time as what would be expected based upon history. We have these four historic precedents. These were the markets basically that led the previous great bull market advances.

The cotton in 1864 was the leader in the Civil War bull market into the 1920 high. Sugar was the leader in the great agricultural boom in the early seventies and the 1974 high. Many of you know that the silver market was the leader into the blow off top in 1980. The crude oil is in very good company as far as great historic inflationary boom, blow-offs, and bear markets that followed.

Okay, now moving to the next step. Based upon the June 30th high in the crude oil, the question is what will we expect next? Three of these markets, the sugar in ’74, silver ’80, and cotton in 1864, these were bear market rallies. Actually, the bear market rallies were followed by next legs down in overall bears.

The red represents legs down in bear markets. By contrast, the cotton market in 1920, this was a first leg up in a bull market. That’s why it’s in green. Once the top was in place, we experienced a correction in a bull market and this was followed by the resumption of the bull market.

Forecasting Overall Commodities

What we’ve been telling subscribers is that what we believe is that a final low is in place in commodities. This bust cycle is going to be akin to the 1920 and 1948 bust cycles and not akin to the 1980 and 1864 bust cycles, which were long-term deflationary bear markets.

The 1920 and 1948 were relatively short-lived once all of the deflationary pressure and the panic selling was done, final low culminations took place and then the long-term bull market started from there. I believe that that’s what our market is going to do.

In terms of these precedents, that would place us most closely akin to the 1920 cotton market. Let’s look at this. After the high was established, you can see that the angle of descent in the sugar market in the 1974 was this, cotton in 1864, silver in 1980. Protracted legs down in what were overall bear markets, and none of these markets established final lows, even at this point.

These were lows prior to bear market rallies, then other legs to the downside. Now, the cotton, on the other hand, the correction in the cotton – and it was very significant – bottomed out in what would be basically December first in our market. The top on June 30th, then there was about a five-month correction in the cotton in 1920 before the resumption of the bull market.

However, after the top, this angle here shows the first sell off in the cotton in 1920. It was like this violent sell off, and then there was basically zig-zag trade and ultimately we went to an incremental new low beneath what would be the equivalent of about 55 dollars in the crude oil.

Pretty severe angle of descent here after the final top was in place, and you can see that our crude oil, I mean, seven days of trade, we’ve clipped off 20% of the decline, so we’re definitely oversold on a short-term basis.

Now, in terms of the observation going into Monday, relative to our historic precedents’ prices running ahead of time. On this basis once this emotional sell off is complete, the market would need to experience a rally from the oversold condition, or experience consolidation before the resumption of the decline.

Given this windfall situation in our long put options, it is prudent to look for a point to take at least partial profits. That’s what we’re doing at this point in time for subscribers since we’re extremely oversold. Once this selling pressure is off there should be some backing and filling at minimum and possibly a snapback rally.

Gann Global Proprietary Commodity Index

In terms of this chart, this is the Gann Global Commodity Index (see video) during the Great Depression. This is a daily index that we compiled after accumulating the historic data. The decline that we experienced in our commodity bear market followed this angle of descent. We declined 66% in seven months and seven days after establishing the July or ’08 tie.

During the Great Depression, it was a much more protracted decline. It was more severe in percentage terms, but it took longer. The velocity of our decline is much greater than occurred in commodities during the Great Depression. This is an interesting thing to consider.

Now, one of the reasons I’m showing this chart is that our decline in the stock market, our bear market was the second greatest in history after the Great Depression. Our bear market in commodities was the second greatest in history after the Great Depression. We certainly have to be looking at that precedent for clues as to what can take place in our market.

One of the things I wanted to point out in this chart relates to that. First of all, we’ve already dismissed that we are following the DNA of a Great Depression in our market. We have a severe recession, but our projections show a final low is in place in the stock market and likely in the commodities.

However, notice that once the stock market put in a final low in August of 1932. This is actually a commodity chart, but stocks put out their final lows with the Great Depression in August of 1932. Commodities established this intermediate low about two months before the final stock market bottom. We experienced this pretty sharp rally, the sharpest that we had seen since the bear market started, and then we went to a new low into February of ’33.

That decline coincided with a bull market correction in stocks. It’d be great if I had the stock market side by side. In other words, the commodities made a new low, whereas stocks were making a higher bottom. There was bullish divergence in commodities.

The reason I show this is that we do have to appreciate that at a potential final low in the stock markets. Commodities still struggled in 1932, and obviously we are bearish over the short and intermediate term in commodities, although we’ve already seen a very significant decline. The 1932 precedent does lend itself to adding additional credence to our expectation to lower prices and commodities.

Goldman Sachs Analysis

Now, looking at the Goldman Sachs index, this market has come down very quickly. One of the things I did was in setting up the shorts in these markets, particularly in the crude oil, was kind of to lambast the popular opinion. These are comments that I’ve made previously with regard to coming out and talking about $85 crude oil when it’s at $70 a barrel. In a sense, lambasting the media for beating the drumbeat, I said here. This was back on July 3rd, right up towards the highs here.

This was on June 20th, just after the top, I said, “This is at a time when prognosticators, economists, the media, and the public are talking about the perpetuation of the current advance. Yes, I’m bullish, but short term and intermediate term, not in your life!”

So in the aftermath of that, we’ve seen this dramatic sell off. Not a surprise.  This is by virtue of the markets conforming to my expectations. The odds continue to favor more downside, and selling by those on the wrong side of the markets fuels additional selling.

The decline on the Goldman Sachs is one day shy of being one month long. My expectation is for this projected correction to consume more than that. Typically, corrections do. However, on a short-term basis we are oversold.3

August Crude Oil Analysis and Forecast

Now, moving out to the August crude, you can see here’s the seven day decline that we’ve experienced into Friday’s lows at 58.72 basis the August. This was on July 8th, I said “Anyone betting on the economy by holding either long positions in the stock market or long positions in commodities is receiving a rude awakening.”

They can be assured there are investors and speculators who have a commitment to long positions in both and are getting hurt in both simultaneously. This increases the probability the declines will be sharp, potentially short-lived, as these ill-fated longs exposing people to greater risks than they could have intended will likely be unwound at the same time due to panic margin call selling.

This is providing an ideal playing field for our current short positions and increases the odds the projected higher bottoms in the S&P 500 and crude oil will be completed at approximately the same time.

So we have the stock market put on its top on June 11th, the crude oil put on its top on June 11th, the soybeans put on their top on June 11th, so we are seeing the commodities continue to move, the board move together. This deflationary move is a negative omen for the stock market, and any weakness in the stock market is a negative omen for the commodities.

They should be moving hand-in-hand to the downside. Now, the comment that we had in the aftermath of Friday’s trade, we have declined 20% in seven days. Given the velocity of the decline, it is reasonable to expect the market to run stops beneath the minor low at 57.52.

Here is this minor low, which was followed by the final surge to the upside. We’re coming down at great velocity as well, and so we can be assured that there are some sale stops beneath that low. If this takes place in short order, and that appears likely, it would make sense to take partial profits. At this point, if we can see the market break below this 57.52, obviously we’re going to be watching to see what the stock market is doing as well.

If we can break that 57.52 in a relatively short period of time, based upon the oversold condition it’s likely it’ll be prudent to take at least partial profits. Then if we see consolidation over rally, we would look to re-enter put positions and likely buy some further out of the money option since we do expect that definitely this April low would be broken at approximately $51, and a very good possibility that the 43 low will be broken.

The contract low went through in one of our previous videos, the huge carrying charge premium annualized at 30% suggests that this market, once it comes down, could take this 43 out, but would still be well above the nearest futures low, which was at approximately $32 a barrel.

If you understand carrying charge premiums, sometimes they can be excessive, in other words, distant contracts trading way above the front month contracts. That’s the case in the crude oil, and usually in those situations, it means the market does need to experience a basing pattern and that sets the stage for, in this case, what would be a second leg up in a bull market.

This correction, believe it or not, could carry and even break contract lows, establish a higher bottom basis the nearest futures, and then we would be off to another leg up in an overall bull market. In looking at the cash, the comment that I made and related to the both overbought and high carrying charge situation, my expectation is the cash comes down, it could break this 45.88.

If that were to happen in the cash, then our futures contracts would be very close to breaking contract lows. You can see that the cash low for the bear market was all the way down at 31.81, so a decline to 45.88, while it would take out potentially contract lows in the futures, it’s still way above the lows basis the cash.

The comment here “Relative to the 136% advance, the current decline has been relatively modest having retraced as much as 31% of the overall advance.” That’s where we’ve come to so far as of Friday. “Probabilities are greatly in favor of this correction being more severe and more complex than what we’ve experienced thus far.”

Analyzing the Greatest Bear Market Declines in Stock Market History

Drafting down to the S&P 500, in the aftermath of first legs up in the great bear markets in history, the greatest bear market declines in history. The first legs up were uniformly quite violent, snapback rallies from extreme oversold conditions, and then the secondary corrections took place in the S&P 500.

Our projections ideally would be to see the S&P 500 drop down to the 835, 840 level, minimum basis the cash. That would replicate the 1938 decline. The 1932 decline was much more extensive in terms of time consumed and percentage retracement of the first leg up. You can see that these corrections were at times very short-lived, very violent.

On that basis, if we have completed a first leg up in a long term bull market in the stocks, then there is no expectation that the correction would be this shallow to 869.32, which is our low so far. We should see more downside here. Obviously, with the crude oil dropping 20%, that should be a negative reflection on the stock market that there should be a sell off of a higher order than what we’ve seen so far.

In looking at the September S&P 500, which is the trading contract this last week, we did break below all of this consolidation area since the May 15th low. That was 873.10, we dropped to 865½, so a little less than eight points into new lows. A lot of sell stops hit down there, no follow through to the downside, but if we break this low decisively by approximately 400 points, the likelihood that we’d get confirmation that the down trend is still in effect.

However, keep in mind that what we have here in terms of our shorts, this is a countertrend play in our estimation. We are short the market. Generally we want to be on the long side of the market in favor of the trend, once a bull market is in force which we believe is the case here. But all of our work showed us that this correction should be violent and therefore playable on the short side.

It’s going to be very interesting to see how it plays out. My expectation is that we have shorts, expecting to see lower prices here. We shorted right at this 917 level so I’ll have a huge breakaway the day that we got short with some follow through here. It’s just going to be interesting to see how things play out. This is a moving target from the standpoint of how the trade is playing out day to day. Crude oil is extremely oversold here. Obviously that plays into the equation as well since all these markets are moving in tandem basically. So we’ll be updating you as far as the returns and additional trade comes in. Have a good day and profitable trading.

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.

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.

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.

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

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 *

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.