Geometry and cycle analysis of previous updates on the soybean market discussed the possibility of tops being made in April and/or May 2014. The last update talked about a harmonic of Gann's 20 years cycle due to turn in late May 2014.
Even though the market broke above the April tops, there are still indications of a possible top being made on May 22nd. The geometry and price projections supporting this are discussed below.
However, it is important to keep in mind that the corn and wheat market have declined below their 50% retracement since April/May, which has not been the case in the soybean market. It is our believe that all three markets are in a bull market and may resume their uptrend in the future.
Soybean geometry analysis for cash and futures
Figure 1 contains two windows. The left window is a daily price-time chart for July soybeans from 2013 to 2014. It shows a couple of PTVs[1] starting a the August 2013 bottom.
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| Figure 1 (left) Daily July soybean futures. PTVs related to the second Square of Twelve. (right) Daily cash soybeans and successive PTVs adding up to integer multiples of the Square of Twelve. |
The first PTV measuring 288.65 or the second Square of Twelve, indicated the reaction top of March 2014. The second PTV measures 408.50 or the second Square of Twelve times the square root of two ratio (√2 x 288 = 407.29). It ends at the high of May 22, 2014. Gann's 20 years cycle harmonic was due to turn around May 20th.
The right window from Figure 1 is a daily price-time chart for cash soybeans from 2013 to 2014. It is an updated chart from a previous update. It shows several PTVs and their sum adding up to integer multiples of the Square of Twelve. The reaction bottom of March 2014 added up to the third Square of Twelve or 432. The April tops added up to the fourth Square of Twelve or 576. The high of May 22nd added up to the fifth Square of Twelve or 720.
Velocity price projections
As explained in a previous update, it is possible to make price projections using market velocity. Figure 2 is a daily price-time chart for July soybeans together with a market velocity indicator. It shows several price projections clustering around the same price level, between [1529c, 1545 1/4c]. The average of these projections is 1537 1/2c, which is very close to May 22nd high at 1536 3/4c. This is further confirmation that a possible top in taking place in late May 2014.
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| Figure 2 Daily prices for July soybeans 2013-2014 and a market velocity indicator. Velocity price projections clustering around 1537 1/2c, near the May 22nd, 2014 high. |
Conclusion
It is important to note that, since January 2014, every top indicated so far has only been a reaction top, followed by a modest decline. The geometry analysis presented above indicates the possibility of a market top, but Gann's 20 years cycle could have aligned with an acceleration bottom on May 19th. This is still a possibility.
Additionally, May is a seasonal month for extreme high prices in the soybean market. And it has been stated in previous updates that statistically, when the market bottoms in November, it will most probably rally until a May top.
However, unlike the soybean market, the corn and wheat markets have had important declines from April/May. They should resume their uptrend in the future, casting some doubts on how long could beans decline.
[1] PTV stands for Price-Time Vector. This concept was introduced by Bradley Cowan in his writings. Both PTV and Price-Time Vector are trademarks of Bradley Cowan.
Update: Soybeans June 2014
Nadiel Outis
Grain Market Analysis
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