Soybean Futures:
Soybeans have been stuck between soybean meal and soybean oil markets. We feel the soy oil market has bottomed and is working through a nice correction, and the soybean meal market is working on carving out a bottom but there just has not been enough price action to be confident. More of these with the charts below.
Below is a May soybean chart, last week we were looking at the 62% retracement zone as an area the market may come down to and find support, and we came within a few pennies and the market started to reject the lower prices. Knowing this is a very tight parameter but I believe if we can get some strong closes daily above 12.00 level in May soybeans we should see more active liquidation of the managed money short position. We had a nice correction in both time and price and are positioned well to take out the moving averages that sit at 11.89, 11.91, and 11.85.
Also highlighted on the chart is sometimes referred to as a cloud chart. I typically don’t show it but I thought it showed the level of support the market was respecting nicely. With the cloud chart if you are bullish, you want the leading edge of the cloud to be green. It has been red for a while now, but the leading edge is getting very skinny and has potential to flip to green soon.
I like a move higher fueled by the managed money short position, positive values in Brazil despite heavy farmer selling, and a soybean oil market that is ready for another leg higher while a meal market that appears to be forging a bottom of its own. There is still a nice gap on the old crop charts 13.05 on the May, chances are we run out of time in the May and need to roll to the July in that case the gap gets filled at 13.11. If the Gaps are your targets I would be ready to let go of some before the gap gets filled.
Soybean Meal Futures:
Managed money is short 42,000 contracts of Meal as of last Tuesday. Plenty of fuel to break the moving averages on positive fundamental news. A move above 340 bucks is going to get me excited at the potential of a near term bottom in place for the next 3-4 months. Beans are very sensitive to the meal market moves since 80% of the bean processed is turned into meal. Current headwind for U.S. meal is the expansion of the domestic crush but now we will have more competition with Argentina as they continue to harvest their soy crop.
Soybean oil Futures:
This chart is my favorite of the 3 in the soy complex. The channel is measured off the first impulsive move we had off the bottom and the first correction after. Often time markets will come back to the midpoint line and find support but in this case it appears soy oil may have a move sideways correction. We have been sideways for almost the same amount of time as our first impulsive move higher. Based on Fib extensions a move to 51.37 to 52.34 is a very realistic objective in my opinion in the next 4-6 weeks.
This is the only market in the soy complex that the managed money community is showing a net long position.
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