Soybean Market Cycle Analysis and Roadmap for 2016

 The soybean market is analyzed following Gann's and Brad Cowan's cycle theory. Very important cycles are projected to turn in the year 2016, particularly Gann's 84yrs cycle. The turn dates for these cycles are presented in this post together with a possible roadmap showing how the price action might develop during the year.

 Gann's 84 years cycle

 A major harmonic of Gann's 84yrs cycle is due to turn on mid-2016. W.D. Gann mentioned this cycle in his book 'How to Make Profits in Commodities.' A more detailed analysis of this cycle was presented by B.Cowan on pages 61-65 of his book 'Market Science Volume II.'

 Cowan predicted this cycle will turn in the year 2016 or 84 years after the all-time soybean bottom of 1932. Figure 1 is a daily price-time chart for cash soybeans from 2015 to 2016. It shows several cycles due to turn on 2016 including Gann's 84yrs cycle (red.)

 Figure 1 shows this harmonic turning in early August, but the window of tolerance we have calculated for this cycle spans between late July until early September 2016. A month and a half is not large considering this particular harmonic averages 28yrs. Other cycles and geometry should be taken in consideration to pin point when will this cycle actually turn.
 

Figure 1
Daily cash prices for soybeans at central Illinois from 2015 to 2016. Harmonics of Gann's 84yrs (red), 30yrs (gray), 20yrs (magenta, green, black) and 14yrs (blue).

 Gann's 20yrs and 14yrs cycles

 The next important cycles due to turn during 2016 are harmonics of Gann's 20yrs and 14yrs cycles. These are included in Figure 1 in magenta, green and blue colors. These cycles usually shape the behavior of the market during the year, aligning with important turning points.

 Gann's 20yrs cycle

 There are two important harmonics of this cycle due to turn in the second half of the year. The first one (magenta) is expected for August 2016 coinciding with Gann's 84yrs cycle. This is one of the reasons we believe August will be a very important month. On late December 2016 there is another harmonic of this cycle turning (green.)

 August is a typical month for high prices in soybeans. However, when major cycles are turning up during these seasonal high months, the market bottoms moving against seasonal trend. As examples, the reader can review the bottoms of July 1999 and May-June 2010. This could be the scenario we will face if Gann's 84yrs and 20yrs cycles bottom around August 2016.

 Gann's 14yrs cycle

 Another important cycle projected for 2016 is Gann's 14yrs cycle, shown in blue color in Figure 1. This harmonic is due to turn on early October. This is the most important month for bottoms in the soybean market. This is a first indication that there could be a good buying opportunity on early October 2016.

 Gann's 30yrs cycle and an additional Gann's 20yrs cycle harmonic

 There are also less important harmonics shaping the market behavior during this year. A harmonic of Gann's 30yrs cycle, shown in gray color in Figure 1, is due to turn on late January to early February. This is nonetheless an important and reliable harmonic.

 Another harmonic of Gann's 20yrs cycle is expected to turn in June 2016. This cycle is included in Figure 1 in black color. After July, June is the most important month for soybean tops. This is an indication that this cycle could align with a top, before prices decline into August.

 According to seasonal behavior, February is a good month for seasonal lows. However, after a November bottom, soybean prices usually rally into a final top in May-June or January-February. This puts some doubts on whether Gann's 30yrs cycle will align with a bottom or market top.

 Soybeans Roadmap for 2016

 Figure 2 represents a possible scenario for soybean price action in 2016. It is just a visual representation to keep as reference during the year. It focuses on the timing related to cycles mentioned above. In this case we are under the initial assumption that the market will bottom around August aligning with Gann's 84yrs and 20yrs cycle harmonics.
 

Figure 2
Soybean roadmap for 2016. Suggestion of a possible price scenario and turn dates during 2016.

 This roadmap is considering two possibles scenarios. One shows tops aligning with the February and June cycles while the other shows a bottom around February from which pries could rally into a June top.

 Summary

 We have presented here a soybean cycle analysis and roadmap for the year 2016.

 We are under the assumption that Gann's 84yrs major cycle harmonic will align with a market bottom. Based on that and soybeans yearly seasonal trend, we have calculated a possible price scenario for 2016.

 The fact that important cycles are turning in 2016 makes us believe that there will be great opportunities during this year. We will review these projections during the year, as the market action unfolds.

Soybeans - January 2016 

 Ricardo Da Costa

 Grain Market Analysis