Soybeans/Meal

[gene]

I'm buying Soybean Meal. The fundamentals are/have been bearish, but the price hasn't kept dropping, lately. On the supportive side, farmers have been holding out for higher prices.

I expect (hope) to make a bundle in this market, but not very soon. I was thinking Soybeans and Meal are starting a saucer bottom that will last only a few or several months, but now, simply because of the very tight consolidation on the weekly chart, I'm wondering if the market will take off sooner than I expected.

My intention (always subject to change, of course) is to ride the market through thick and thin. I'm in for the long haul. When the chart shows a definite up trend, I will add to my position on dips.

Looking at the weekly chart, I believe Soybean Meal will reach the 190 to 200 range with no problem. If the market obeys the 50% retracement "rule", then about 245 is the target. And that's ignoring the top of the spike. If soybean rust becomes a problem....!!!! ... / :cheesy:

What do y'all think?

 

[TWI]

I agree, I have been scaling into a long in meal for a couple of months now even had a couple of oscillation profits. It may take a while but I believe it to be a good bet, the carry is not prohibitive for holding on for a while either.

 

[Moneycat]

Has anyone ever made a study on seasonal volatility of the agricultural commodities? When do they show the wider price excursion?

Aren't we in the least volatile period of the year?

 

[TWI]

What do you mean by price excursion?

 

[gene]

I dont know if we are or not. How volatile is volatile? Check the monthly chart above. Some December-Januarys are a little slow, some aren't. I don't rely on seasonals. A seasonal rally or break may be big or it may be little...or it may not happen.

I'm looking at an old publication (1998) right now. It says that May Soybeans have rallied between Dec. 10 thru Dec. 24 in 18 of the past 25 years. It also shows a break in the first couple of months for the majority of the past 20 to 25 or so years.

I believe the chart, above, gives a clearer picture; that picture being that the picture ain't clear... as far as seasonality goes.

Anyway, TWalker, I believe, and I are not really hoping for a quick profit on this one, but, rather, are hoping to be getting in on the ground floor of an extended uptrend. If I get shook loose, I get shook loose, but I'm thinking and hoping that this market has seen the bottom.

 

[Moneycat]

I would say that there must be certain periods of ht eyear when grains show more meaningful moves, and other when they don't. My assumption is based on fundamentals.

Say corn has been harvested and not yet sown, there is little risk for those involved in the commodity. Once it starts growing it is subject to wheather threats... This brings more risk, fear and volatility into the game. Suppose wheather is awful at harvest...

My take is winter is the least volatile period of the year.

 

[TWI]

Moneycat, I think you are right
For Soy there are 2 crop cycles the US and the South American. Now the US grain is in the sheds focus changes to Brazil which will start being exported around Mar/April. Brazil probably has slightly less influence on the Chicago market because the pohysicals trade a Brazil and Argy premium market against Chicago which can take up some of the South American volatility.
Therefore I think the most volatile time is definitely the July/Oct period when US weather market emerges and the least volatile around now when US crop is made and Brazil is about to become the crop focus.

 

[gene]

All that is very true, but I rely much more heavily on the charts, because the charts factor in EVERYTHING...short term fundamentals, long term fundamentals, overbought/oversold, the dollar is weak or strong, etc. Here's a copy/paste from the "Coffee..." thread:

When I do look at the fundamentals, I try to figure out which ones count.
"There's a drought in Kansas" and the prices go up.
"But it's rainin' cats & dogs in China" and the prices go down.
"There's lots & lots of corn out there" and the prices go down.
"But EVERYBODY'S buyin' the heck out of it" and the prices go up.
Or so much of the time the "fundamentals" follow the price, rather than the other way around.

 

[TWI]

Gene,
I do agree with you to some extent but I traded grains for a large American commodity company for a few years and we never even looked at a chart yet managed to do very well in the market by having access to good fundamental information that allowed us to build accurate supply/demand projections. I do not think you can ignore fundamentals, what I am doing in Soy right now is based on the fact that prices are historically cheap and the carry is not too high which makes scaling into a long a good idea. I am not waiting for the chart to show me the way in this case. I would not take this approach with FX or bonds or indeed if Soy was mid range in price but if you have knowledge of how these markets work there is no problem with taking fundamental trades.
One big caveat about trading fundamentals is that you have to know your market.
As for Coffee, that is one crazy market anyway. Best opportunities come when everyboody looks to Brazil frost. I got on that once by getting long in April, "just in case". If I had waited for the technicals I would have missed it, as a result of a fundamental trade our desk made annual budget by Q2.
IMO to say you are a pure technician or a pure fundamental trader is actually a limiting factor.

 

[Moneycat]

Gene,
I do agree with you to some extent but I traded grains for a large American commodity company for a few years and we never even looked at a chart yet managed to do very well in the market by having access to good fundamental information that allowed us to build accurate supply/demand projections.

...

IMO to say you are a pure technician or a pure fundamental trader is actually a limiting factor.

I think you have a good point.

Your last sentence says all, but to gather "good fundamental information" as you used to rely on, is not easy for individual investors/speculators. Hence the assumption that price discounts all information and the subsequent use of TA.

 

[Pippppin]

Fundamentals vs. TA

I agree. Unless you have access to "inside information", with fundamentals it is very hard to distinguish between information, and misinformation.

 

[TWI]

Actually I think the most important thing is knowing what fundamental information will have an effect and what will not. Once you have established this, finding acceptable figures is not so much of an issue the market trades available information rather than correct information. Fundamentals are certainly no way to time exits and entries if you have a tight margin but if you are a technician they will let you know when to start looking for either a techncal long or short signal and be far more confident in your subsequent trade.

 

[BBB]

Do you think it is possible for the independent trader to gather the same quality of fundamental information that the commercial operations have?

 

[TheBramble]

Actually I think the most important thing is knowing what fundamental information will have an effect and what will not..

Is fundamental info in the commodities markets more 'directionally defineable' in terms of expected/anticipated impact on prices than news events are on indices & stocks?

 

[TWI]

A lot of the relevant information is released publicly by the the likes of the USDA or foreign equivalent and it works in exact;y the same way as figures in the financial markets, there are expectations and releases. Other news is generally weather related stuff and that is about knowing which forecast the market is listening to or regarding things like length of vessel lin-up to load certain products at certain terminals or strikes by dock workers, that sort of thing. This information is all available through Reuters or Bloomberg.
The advantage the big commercials like Cargill have is that they have people on the ground in all the countries providing analysis daily and have a continuous and large presence in the physical market of all these commodities too so get a good feeling for how the market is at any time.

 

[gene]

Aw, what to heck...I went ahead and took profit. The chart kinda looks like a short-term top. I'll get back in again another day.

 

[darrenf]

Aw, what to heck...I went ahead and took profit. The chart kinda looks like a short-term top. I'll get back in again another day.

If that were my position, I bet the market would take off like a rat up a drainpipe tomorrow

 

[gene]

D'oh!!

 

[bgold]

For what it is worth, according to MRCI buying SM K around 22 Jan and exiting around 8Feb has been profitable 15 out of 15 yrs. Average gains: 3.69pts

I would agree that the chart looks good. I might give it a try. Target: 1850+ w4 highs of late Aug (basis March). Meal chart certainly looks a little better than beans and Oil although Oil supposedly will have seasonal wind in back before end of the month.

 

[Moneycat]

How do you rate reliability of such trade recommendations?

15 out of 15 is 100%, so it seems good, but it is still only out of 15 which is not really meaningful...