How could the November Soybean contract finish lower, when at the same time, the front month September soybean contract moved so much higher? Is September's impressive strength a bullish sign – bull markets are usually led by the front month.
The September contract settled on Thursday at $12.16 per bu., up 34.5¢ or a 'big' 2.9%. (The contract had fallen 27.5¢ on Wednesday.)
By contrast, the November contract closed down 2¢ on Thursday, settling at 1,176¢/bu.
There is a good reason September futures have been so strong. Farmers are virtually sold out of last year's crop, and this year's new crop has been delayed by the rains. As a result, there is a short term shortage; but that won't last long, for there should be a big crop that is ready soon.
So what will happen next? Will the November futures contract follow September higher, or will the November contract move lower as it did yesterday.
Q: What has happened in the past when, on a day September Soybeans finish up more than 1% and November Soybeans finish lower?
A: This event has not happened very often, but when it has, November Soybeans have continued lower two-thirds to 100% of the time, one to four weeks later. November beans have shown a strong bearish edge that peaks nine trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Thursday, Sept. 11, 2008) is Wednesday, Sept. 24, 2008. November beans declines in 100% of the cases (6 of 6) by an average of 3.9% relative to the close on the event date. The overall return of the six cases is -3.9%, which, based on the close on the event date ($11.76), provides a target price of $11.30-2.
For more Market History go to www.markethistory.com
Robert J. O'Brien Jr. is President of County Cork, LLC, a Commodity Trading Advisor (CTA) based in Skokie, Illinois.
