Soybeans July 16 2008

Before I get into today’s blog, a short detour to comment on Ana’s contribution:

The SEC has passed an emergency rule to limit short selling in certain types of institutions. Hmm, the thin edge of the wedge? Steve Briese recently placed a warning on his site that I posted on “S&P 06-30-2008“. Speculators are being blamed for the short-sighted policies of the Bernanke FED and the Bush administration. What’s frightening is this could be  the first step in this direction. The next targets could well be the evil-doers who have pushed up Crude Oil prices! It would not surprise me to see some move in that area. Be warned!

Off my soap box and onto the Soybeans. In this blog. the data  used for my charts is CSI’s Perpetual Contract. The ideas expressed here are contained in the Nature of Trends except for the references to Seasonal Patterns and COT data.

Figure 1 shows the 12-month swing (12-M; yearly trend).

07-16-2008-12m-s.jpg

Figure 1 12-M Soybeans CSI Perpetual

Notice that the current increase of 225% is second only to that of the 1974 increase. In addition,the stats from Gann Global data confirm the view derived from Figure 1: we are at an extreme price (i.e. mean + 3 stdev) where theoretically, there is less than a 1% chance of the 12-M swing line continuing up.

Figure 2 shows the 13-week swing (13-W; quarterly trend).

07-16-2008-13w-s.jpg

 

Figure 2 13-W Soybeans CSI Perpetual

Notice that we have a potential Upthrust Change in Trend pattern. We need to see a weekly close below 1486 that exhibits selling conviction to confirm the13-W Change in Trend.

The ancillary tools I use are also supportive of a short. Seasonal highs occur at this time and bottom end September. In addition the COT studies show  noticeably reduced trader interest than that shown at the March high, making a continuation of the up move unlikely. These indicators increase the probability of a short moving to at least Figure 2’s Primary Buy Zone (1086 to 1143, basis Perpetual Contract).

Figure 3 shows the bars that I entered the trade. I was happy to enter on the basis of a potential 3-d Head & Shoulders Pattern and more importantly because:

  1. A DOJI formed on Friday July 11 2008
  2. The market on July 14 formed an ‘Open-Gap’ down that was not filled on the 1st hour. (Bearish sign)
  3. The bear bar of July 14 prompted the entry on July 15 when the market accepted prices below the low of July 12.

Stops are above the July highs. My reward to risk ratio is 6:1. (Yes I did pre-empt the 13-W Change in Trend signal. I’ll do this where the short-term patterns support early entry, as in this case).

07-16-2008-18-d.jpg

Figure 3 18-d Soybeans CSI Perpetual

2 thoughts on “Soybeans July 16 2008”

  1. Ray

    Nothing to do with commodities, but this moves markets:

    Acket of Julius Baer Says U.K. `Heading for a Recession’ July 16 (Bloomberg) — Janwillem Acket, chief economist at Julius Baer, talks with Bloomberg’s Jeremy Naylor from Zurich about the outlook for economic growth, inflation and interest rates in the U.K. and euro-region.

    U.K. unemployment jumped the most in June since the aftermath of the last recession in 1992 as the economic slowdown forced companies to cut jobs and stop hiring.

    (Source: Bloomberg) Play Watch

    http://www.bloomberg.com/news/av/

  2. Ray

    This is award-winning.

    THE PATRICK BYRNE AWARD FOR FIGHTING MARKET MANIPULATION: CHRISTOPHER COX
    by Johnny Debacle

    Topher Cox, head of the SEC and also a Jedi knight, has issued an order aimed at crushing the short-sellers and SITH lords who are trying to destroy the GSEs and some of the major investment banks. That order is the requirement that a trader must pre-borrow shares before shorting certain stocks.

    c.f.

    SEC Chairman Christopher Cox said the SEC would institute an emergency order requiring any traders to pre-borrow stock before shorting Fannie Mae and Freddie Mac, the embattled government-sponsored entities that own more than half the nation’s mortgages. It would also apply to the stocks of Lehman Brothers, Goldman Sachs, Merrill Lynch and Morgan Stanley. The order is a near-term fix and will expire in 30 days.

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