Gann Global Financial

In light of additional research that we’ve done, I believe the probabilities have increased that we are in the stronger of the two positions that we felt we were in.  In other words we’re bullish, but the question is just how aggressive is the advance going to be? Now I believe that the evidence is pointing to the possibility that we’re in a very aggressive, and will continue to be in a very aggressive advance.

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.