Technically Speaking

In this week’s On the Market column I discuss some of the bargains that buyers could find in the markets this Friday after Thanksgiving, also known as Black Friday. Shoppers have been flocking to stores since shortly after Thanksgiving dinner dishes were done, working through the effects of tryptophan to take part in what is believed to be some of the best sales of the year. Not me. I’m still a firm believer that the best deals are available late on December 24. Did you know you can get a whole pack of car air freshening trees for about a $1?

Anyway, some of the hot items this holiday shopping season, like most years, are expected to be the wide variety of Apple products. From iPads to iPad minis, iPhone 5s to MacAirs, the coming weeks should see plenty of merchandise bearing the familiar symbol of an apple with a bite taken out of it move through the checkout lines.

Despite this outlook, something that is not new, Apple stock has taken a beating over recent months, falling from a high of $702.10 on September 19 to a low of $525.62 on November 15. As I was traveling to a speaking engagement last week I had the opportunity to listen to nonstop market talk on satellite radio, and the hot topic was Apple. Analysts loudly argued the point that the company continues to show bullish fundamentals, yet the stock price (as previously mentioned) had dropped about 25% over the span of two months. And while a variety of opinions, both bullish and bearish were expressed, the bottom line seemed to be that most of the pressure was due to funds, rather than long-term investors, selling simply because the price had become too high, regardless of fundamentals.

As I listened to the seemingly endless discussion over Apple, I couldn’t help but see the similarity with soybeans. The latter is facing a well-known situation where global supplies could approach zero by the time South America (Brazil and Argentina specifically) gets to harvest next March. Weekly demand from China remains strong and is expected to stay that way over the course of the winter. Yes, there have been cancelations of purchases recent but that is an old game where high priced buys are replaced by ones made after the market has moved lower. How is that possible, you ask? Think about it, it’s China. The largest buyer in the world sets the rules, again something that is not new.

A look at a daily close chart for both Apple and soybean future shows the similarity I initially thought of. Where Apple (red line) has fallen the previously mentioned 25%, soybean futures (green line) have dropped about 22% from the high daily close of $17.68 1/4 (September 4) through the low of $13.83 1/4 on November 16. And, like Apple, most of the selling has come from the noncommercial (investment, fund, etc.) side of the market with weekly CFTC Commitments of Traders reports showing this group reducing their long futures holdings by 37.5% from a high of 322,317 contracts in mid-July to only 201,469 contracts in mid-November.

What will be interesting over the coming weeks is Chinese buying interest following the fund selloff in soybeans. In its own way it could prove to be a holiday sales opportunity too good to pass up, particularly for traders who most likely got the better of the intrepid traveler Marco Polo all those centuries ago.

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