Update: February 2014 and a 9 Years Cycle in Cash Soybeans

Yesterday's update mentioned a soybean cycle due to turn in February 2014. The triangular wave pattern in Figure 1 shows that this cycle was expected as a market top. However, recent market activity casts some doubts as to whether it will be a top or acceleration bottom.

Moreover, the wheat market forecast presented a cycle due to turn in early February based on smaller harmonics of Gann's 20 years cycle, however larger harmonics of these cycle project a window that extends until late March early April 2014.

A 9 years cycle and its subdivisions in the soybean market

Figure 1 shows a weekly cash soybeans price-time chart. It contains a 9 year cycle and its subdivisions. The reader can verify that this cycle has aligned with major turning points in the market, particularly those defining the triangular wave pattern.

Figure 1
Weekly cash prices for soybeans at central Illinois from 1969 to 2014. Triangular wave pattern showing alternating up and down trends correlated with a 9 years cycle in the soybean market.

Some of these turning points are: the multiple top formation in 1977, the multiple bottoms in 1986, the multiple tops in 1996 and the secondary bottom of February 2005.

It is important to acknowledge that in 1996 the tops were made in July and September 1996, while the cycle turn date was Aug 05th, which was a bottom, from which the market rallied to the September top.

Figure 1 shows that an initial turn date for this cycle is expected for Feb 07th 2014. The futures market has been trading in a range, making higher bottoms and lower tops. Gann explains that this often occurs, and when the market crosses tops it is an indication of much higher levels. On the contrary, the first time it breaks an important bottom it shows that a decline will continue.

Figure 2 contains a daily cash soybeans price-time chart. It shows a closer look to the market from 2004 to the present. Initially, the cycle is anchored at the Feb 04th 2005 final bottom. A subdivision of this cycle is aligned with the Jul 03rd and Jul 11th 2008 tops. This produces a window of time when a cycle turn date could be expected, from Feb 07th to the 18th.

Figure 2
Daily cash prices for soybeans at central Illinois from 2004 to 2014. The 9 years cycle pointing to a cycle turn window from February 07th to the 18th, 2014.

Conclusion

The soybean market bottomed on Nov 05th 2013. The 2014 soybean forecast and roadmap mentioned this bottom as important, and possibly, the beginning of a bull market rally. Additionally, a 9 years cycle is due to turn between Feb 07th to 18th, 2014.

The market has been trading in a range, making higher bottoms but lower tops, hence showing no definite trend. Years ago, this cycle harmonic was anticipated to come out as a market top, but recent market activity casts doubts on this idea. However, a market top is an scenario that should not be totally dismissed.

As stated in our previous update, we anticipate higher prices. This would mean that the 9 years cycle should invert and turn up as a market bottom in February 2014. If this is the case, it should be confirmed by other factors.

Update 2: February 2014 Soybean Market  

Ricardo Da Costa

Grain Market Analysis