Update: Soybeans - October 2015

This short update takes a look at the cash soybean major bear markets and compares them to the current bear market from 2012.

 Figure 1[1] is a monthly price-time chart for cash soybeans at Central Illinois from 1969 to the present. Starting at the 1973 top, it shows several important bear markets together with their respective percentage price decline from top to bottom. The duration of each one of these bear markets is different, the shortest lasting only around 21 weeks while the longest lasting up to 159 weeks. However, their percentage price declines are similar, ranging from 46.57% up to 58.07%. This means that in each one of these bear markets prices were more or less cut in half before any significant rally or bull market began. The average and median declines are 52% and 53%, respectively.

 

Figure 1
Monthly prices for cash soybeans at Decatur, Illinois from 1969. Percentage of price declines for every major bear market since 1973.

 

 The more recent bear markets from the 2004 and 2008 tops were both 54% and 53% declines. The current decline from the historical high of 2012 at 1790¢ down to the late September 2015 low equals 52.96%, which is similar to the previous declines and the median value.

 

Figure 2
Weekly prices for cash soybeans at Decatur, Illinois from 2008. Price projections for the current bear market based on previous historical percentage declines.

 Figure 2[1] is a weekly price-time chart for cash soybeans at Central Illinois from 2008 to the present. The chart highlights a price range area from 956 ½¢ down to 750¢ per bushel based on the percentage declines of previous historical bear markets. This price range of +$2.00 per bushel is quite large, but it provides a rough price target area at which a final bottom could be expected.

 

 Figure 2 also includes the percentage price declines from the July 2012 top into the October 2014 bottom and current September 2015 low. A projection from the more recent May 2014 top to a double bottom against December 2008 is also included.

 

 Summary

 An analysis based on the percentage price decline showed that prices were more or less cut in half in every major bear market from 1973. With this information, a rough price projection was made from the July 2012 top which marks the beginning of the current bear market. This projection shows that we are within the price range at which a final bottom could be expected. This price range is quite large, more than $2.00 wide; hence cycle and geometry analysis is necessary in order to be sure a bottom has been made.

[1] Charts drawn using free charting software Gannalyst Professional 5.0 which includes several basic Gann techniques.

Update 2: Soybeans - October 2015 

 Ricardo Da Costa

 Grain Market Analysis