A soybean market cycle analysis and roadmap for 2014 was presented here. It was mentioned the possibility that the Nov 5th 2013 bottom was the beginning of an important bull market. Additionally, it was discussed that both Gann’s 20 and 14 years cycle harmonics had turning point dates for January 2014. An update on these cycles is presented together with an analysis explaining the possibility that the market bottomed on Friday Jan 24th.
Cycle Update
Figure 1 is a daily price-time chart for March soybean futures. It contains the same cycle harmonics presented in the Soybean Market Cycle Analysis and Roadmap for 2014. In this case, Gann’s 20 years cycle harmonics have been anchored at the reaction bottom of Jul 24th 2013 showing a better correlation with market action. One of these harmonics has a turning point date projected for Jan 23rd to 24th 2014.
On Jan 2nd, March soybeans made a market bottom at 1262 1/2c which aligned with a harmonic of Gann’s 14 years cycle, as seen in Figure 1. On Jan 24th the market made an intraday low at 1263 1/2c, probably aligning with Gann’s 20 years cycle harmonic.
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| Figure 1 Daily prices for March soybeans futures from 2013 to 2014. Harmonics of Gann's 20yrs and 14yrs cycles together with PTVs contracting following the square root of two ratio. |
Market Geometry
Moreover, the PTV [1] analysis shows that the market has been contracting following the square of two ratio. The importance of this ratio is explained in detail in Cowan’s writings. Figure 1 shows that PTV AB has a length of 204.54, which is the length of BE, 142.61, multiplied by the square root of two. This is:
AB=√2×BE
As well, PTVs BC, CD and DF are related to each other by the square root of two ratio. This is:
BC=√2×CD
CD=√2×DF
The reader is encouraged to review this calculations on his own.
Momentum
Figure 2 contains a daily price-time chart for March soybean futures together with the momentum indicator. The momentum indicator is calculated for 1, 3 and 5 bars, which are 1 trading day, half a week and a whole trading week, respectively.
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| Figure 2 Daily prices for March soybeans futures from 2013 to 2014 and momentum curves. Divergence between price and momentum indicator suggesting the possibility of a market rally. |
Momentum contains information about the amount of movement in the market. When the market is making lower bottoms and at the same time the momentum curve is making higher bottoms, it shows strength and a rally is due. On the contrary, when the market is making higher tops and the momentum curve is making lower tops, it shows weakness and a reaction is due. This is called divergence between price and momentum.
The 5 day momentum curve (blue) is diverging against the probable double bottom formation in January 2014, as shown by the dashed lines in Figure 2. As well, the 1 day momentum curve (black) is diverging against the more recent Jan 22nd and 24th lows. This shows that the market is in position to rally.
Velocity Price Projections
Figure 3 contains a daily price-time chart for March soybeans futures with an indicator of market velocity. The velocity of the market is useful to project future price targets. This has been stated by Cowan and Gann, and based on their commentaries, the technique here presented was developed.
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| Figure 3 Daily prices for March soybeans futures from 2013 to 2014 and velocity indicator. Market velocity is used to project future prices as mentioned by Cowan and Gann. |
From Figure 3 it can be seen that the price targets calculated after the November 2013 bottom were reached on Dec 23rd 2013 top at 1339 1/4c. Afterwards, a reaction followed and the projected price target was reached on Jan 2nd 2014 bottom at 1262 1/2c. The price targets projected after the Jan 16th swing top are at 1256 1/4c and 1233 1/4c. They have not been reached. Instead, the market made an intraday low at 1263 1/c and rallied for the day, keeping above the Jan 2nd bottom.
Conclusion
Even though the velocity price projections have not been reached the cycle analysis update, the geometry of the market and the momentum curve show that it is likely that the soybean market made a bottom on Jan 24th at 1263 1/2c. This indicates the possibility that the market will rally and continue its advance, assuming the Nov 5th 2013 bottom will hold.
Update: Soybean and Wheat Markets February 2014
Update: Soybean and Wheat Markets February 2014
[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.
Nadiel Outis
Grain Market Analysis
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