January Soybeans: After an impressive September and October, January soybeans have been in a downtrend since Oct. 14. The current correction has not quite spanned 38.2% of the preceding rally, making the retracement relatively mild so far. The fact the correction has not spanned 38.2% of the preceding rally would also suggest the current retracement is not complete. Major moving average support lies below the market with the 50-, 100- and 200-day moving averages resting between 9.13 1/2 and 9.21 1/2. Momentum indicators are not yet suggesting a divergence with price, but they have bottomed and risen from the Oct. 30 lows. If price makes new lows in the coming sessions, but momentum indicators such as stochastics fail to make new lows, we would have a technical bullish divergence in momentum and would need to watch for bottoming action in price. The Volume Point of Control (VPOC) is 9.34 1/4 with the heaviest volume in the life of the contract occurring above spot prices; 9.23 1/4 would be near-term support while trade would need to close back above 9.37 1/4 or 9.38 3/4 to flip trends higher.
December Soymeal: Soymeal is also locked in a downtrend, although the uptrend present during September and the first half of October did not extend itself to meal. The September rally in meal was only 7.5%, while in soybeans it was 10.9%. This puts December meal much closer to the fall lows and major support candidates. Spot prices are currently tangled in major moving averages with the 50-day below at 302.10 while the 100-day sits at 305.30. The December soymeal contract is a great example of a potential bullish divergence in momentum, which has yet to be confirmed. On Oct. 30 and Nov. 6, price made new lows for the move while stochastics made higher lows. Until price can recover above a prior corrective high of significance, like that from Nov. 1, the bullish divergence will remain only a potential one and cannot be used as reason to move to a fuller bullish policy in this market. Spot prices are sitting right at the contract's VPOC of 302.60, which could make the contract "sticky" around current levels.
December Soy Oil: The most impressive chart picture in the soy complex remains soy oil with a strong, persistent uptrend in place dating back to May 13. The rally over that time has measured 17.5%. Momentum indicators have suggested the rally was diverging several times over the last two months, but the December contract has yet to break below a prior corrective low that would warrant moving to a bearish policy. Major moving averages sit below the market from 29.51 to 30.03. Short-term risk parameters to watch in our view would be 31.89 to the upside and 31.42 to the downside. The volume profile since the beginning of the rally on May 13 shows almost all of the activity below the market, as one would expect. December soy oil's VPOC sits down at 29.86, although a fair amount of trade has occurred at 31.66. A supportive view of December soy oil needs to be retained until or unless this market can break below a major corrective low such as the one from Oct. 31 at 30.57. The rally should continue, although any signs of slowing momentum as price approaches the February highs would be a warning sign the current move is running out of steam.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.
Tregg Cronin can be reached at email@example.com
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