Update 2: February 2014 Soybean Market

This update on the soybean market presents price targets projections for March soybeans and a commentary on seasonal behavior of the market. 
 

Velocity Price Projections

Figure 1 shows a daily price-time chart for March Soybeans and a market velocity indicator. There are two price targets projected using market velocity around 1372c and 1404c per bushel. Additionally, using market velocity February 19th, 20th, 26th and 28th are projected dates when a possible turning point could be expected.

Figure 1.
Daily prices for March soybeans futures from 2013 to 2014 and velocity indicator. Market velocity is used to project future prices. Two price targets are presented at 1372c and 1404c per bushel.

Today, February 19th, the market reached one of the price targets at 1371 3/4c and reacted, at least temporarily. This price target is close to the tops of September 2013 at 1369c and 1377 3/4c.

The 9 years cycle presented in a previous update was expected as a market top, but recent market activity hinted the possibility that it could invert into a market bottom. This is still a scenario under consideration. Moreover, the last rally broke the previous swing tops indicating higher prices.

Soybean Seasonal Trend

The soybean market typically follows a seasonal trend in which there are bottoms around October-November, then a rally until December-January, then a secondary bottom in January-February followed by a rally until the summer tops around April-July, then a secondary top in August-September and back to the October-November bottoms. Figure 2 shows the average yearly behavior of the cash soybean market.

Figure 2.
Cash soybeans seasonal trend. The typical behavior of the soybean market shows bottoms in October and tops in June-July.

 Studying the history of the market and comparing it to recent market activity, there have been years in the past with a similar behavior. These years show lows in November, a rally until December, a secondary bottom in January-February and a final market rally until March thru August.

The soybean market 2014 roadmap presented harmonics of Gann's 14 and 20 years cycles due to turn between April and June 2014.

Conclusion

Today March soybeans reacted on a price target calculated using market velocity. If the market reacts and makes a higher 2-day swing bottom, it would be a confirmation of the January 30th bottom and higher prices.

The 9 year cycle could have aligned with the January 30th bottom, inverting and turning up. However the most probable dates were expected for early February 2014.

The seasonal trend and similar past years show that when soybeans bottoms in November, it typically has a rally until December and then reacts until January or February from where it tops around the summer months. There are harmonics of Gann's 14 and 20 years cycle due to turn between April and June 2014, which could align with an important top.

Update: March 2014 Vectorial Analysis for May Soybeans 

Nadiel Outis

Grain Market Analysis