Soybeans made tops on November 2014. Since then, trading has been slow. These November 2014 tops aligned with several important Gann cycles and have not been broken up to this moment. The general trend has been down, with only small rallies.
According to our 2015 soybean roadmap it is possible we may see a top in mid-year. This post addresses the possibility of a rally leading up to that top based on cycle, geometry and momentum analysis.
Cycle Analysis
There is a small harmonic of Gann's 14yrs cycle due to turn in mid-April 2015. This is not an important harmonic, hence we believe it could align with a rally, hopefully leading into mid-year summer tops.
Geometry Analysis
Figure 1 is a daily price-time chart for cash soybeans at Decutur, Illinois from 2014 to 2015. It shows several PTVs[1] defining market movements since the Oct-2014 bottom.
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| Figure 1 Daily cash soybean prices at Decatur, Illinois from 2014 to 2015. PTVs related to the Square of Twelve. |
From Figure 1 it is possible to see that PTV ABE in red, which defined the market action from Oct to Dec-2014 and from Dec-2014 until Apr-2015 measures:
ABE = 164.23 + 132.52 = 296.75;
which is the second Square of Twelve (2x144). Also, the sum of the smaller PTVs in purple since Oct-2014 until Apr-2015 measures:
ABCDE = 164.23 + 101.59 + 77.13 + 87.79 = 430.74;
which is the third Square of Twelve (3x144).
Figure 2 is a daily price-time chart for May soybean futures. It shows several PTVs defining the market action from 2014 to 2015.
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| Figure 2 Daily prices for May soybean futures from 2014 to 2015. PTVs related to the Square of Twelve. |
The market's rate of vibration seems to be equal to the first Square of Twelve since the Oct-2014. PTVs ad and cf defining the decline from Nov-2014 to Jan-2015 and from Dec-2014 to Apr-2015, respectively, have lengths equal to the first Square of Twelve. This is:
ad = 141.32;
cf = 148.09;
Also, the sum of the smaller PTVs defining the market action from Nov-2014 to Jan-2015 abcd equals:
abcd = 95.78 + 78.85 + 115.37 = 290;
which is the second Square of Twelve or 2x144. Additionally, the sum of the smaller PTVs defining the market action from Dec-2014 to Apr-2015 cdef equals:
cdef = 115.37 + 79.80 + 98.56 = 293.73;
which is also, the second Square of Twelve (2x144). It is also worth noticing the symmetry between the PTVs defining the five swings from Nov-2014 to Apr-2015. The length of the first PTV ab equals that of the last PTV ef. Also, the length of the PTV bc is the same as the length of PTV de.
Momentum Analysis
Figure 3 is a weekly price-time chart for continuous soybean futures from 2014 to 2015. It contains a momentum curve calculated for 1, 3 and 5 weeks.
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| Figure 3 Weekly prices for continuous soybean futures. Momentum curves calculated to 1, 3 and 5 weeks. Bullish divergence between price and momentum. |
From Figure 3 it is possible to see that there is a bullish divergence between price and 5 week momentum indicating the possibility of a rally. A similar divergence took place on late Sep early Oct 2014, from which a rally ensued.
Summary
A cycle, geometry and momentum analysis has been presented. The analysis indicates the possibility of a rally from April 2015. We believe that if a rally takes place it could end with the seasonal summer tops projected in our 2015 soybean roadmap.
There are several cycles due to turn in May 2015 as we discussed in a previous post. Hopefully some of these cycle could align with another bottom taking prices further up. Also, we don't consider that prices will break the Nov-2014 tops in the near future due to their importance.
Soybeans - May 2015
Ricardo Da Costa
Grain Market Analysis
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