April 6, 2021
NO BEARS…ANYWHERE…IN SOYBEANS
During the past few months, according to just about EVERY agricultural analyst I can find, Soybeans and Corn have had every reason anybody could ever dream of to erupt higher and continue the bull markets they started a year ago…According to all the “logic” being touted by these buzzword spouting experts: It’s been too wet or too dry in Argentina, and ditto the same in Brazil. Or South American dockworkers have been on strike. Or we’ve had announcements of MASSIVE exports to China, with exports for both Corn and Beans having FAR surpassed USDA projections, leading to never-ending talk of, “if China buys again.” And finally, we’ve had bullish USDA report after report, including last week’s MINDBLOWING numbers that indicated supplies and possible acreage were far below everybody’s guesses…BUT…even after ALL that, here we still are…with both markets almost exactly where they were three months ago.
So? Guys, IF ALL OF THE ABOVE COULDN’T RALLY CORN AND SOYBEANS, PLEASE TELL ME WHAT WILL? Of course, if we get weather issues, they will obviously take off on the upside, but, hey, that “if” is out there every year, and I’d offer that, RIGHT NOW, after all of this bullish, bullish, bullish news, BOTH OF THESE MARETS ARE JAMPACKED WITH SPECULATIVE TRADERS AND END USERS WHO HAVE ALREADY BOUGHT THEMSELVES UP TO THE GILLS…and I AM OF THE VERY STRONG OPINION THAT THE NEXT THING WE ARE GOING TO SEE IS A CLASSIC SOYBEAN MARKET COLLAPSE AS ALL THOSE BUYERS ARE FORCED INTO BECOMING AN AVALANCHE OF SELLERS.
I mean, really, how many times do any of you have to see this very same situation to recognize what probably comes next? Where we have a bull market that goes on for 9-10 months (like last year) before a single analyst even begins to think “Buy!”, and then the next thing you know is that EVERY ANALYST OUT THERE HAS BECOME A RAVING BULL, and they are all, like sheep, listing 10 undeniable “reasons” why prices HAVE to go higher…including convoluted “logic” like one of my all-time favorites, that “prices HAVE to go higher to ration supplies.” (excuse me, but $14.00 Soybeans suggests that we have ALREADY done that)…At any rate, AGAIN, how many times do you need to hear this script to understand that the next thing we’ll likely/possibly see is the typical 20-25% sell off that is almost routine for Soybeans when they finally have sucked everybody in on the long side? So, one more time…FIND ME ANYONE WHO IS BEARISH.
As always, I might be dead wrong, and if I am, it could easily mean losing every dollar you invest…
BUT I THINK THE SOYBEAN MARKET IS ABOUT TO TOTALLY GO IN THE TANK…
For sure, bad weather MIGHT eventually come along, but for the next 3-4 weeks, I would NOT expect it to be even close to being a factor, and per 40 years of history (charts at the end of this newsletter), all this market usually needs is maybe 3-5 weeks to knock off prices by that typical 20-25%...which would be roughly about $3.00 from here…And with this market LOADED with people sitting there long…and waiting for the “big one” on the upside, I think that IS what we’re immediately/imminently about to see.
I CONTINUE TO RECOMMEND BUYING PUTS IN SOYBEANS
Do note that, even at MUCH lower levels, $2-$3 sell offs are pretty much the minimum downside move…And again, believe me, the declines just START, and NOT on some random bearish news flash that says, “Hey! Get short now!” Not at all. They start simply because they run out of buyers. They start when everybody who WOULD buy, has BOUGHT…And yes, I keep repeating this…because that IS how the markets work.
Part of this game is just visualizing what you think will be happening…based on histories…and what you have SEEN happen 100’s, if not 1000’s, of times in all of the markets we trade…
For the 3rd time, here’s a look at how Soybeans have topped for the past 40 years…And ONE MORE TIME, at that last top tick on every one of these charts, do know that NOBODY was saying, “GET SHORT NOW!” I assure you…The news at every top here was NOTHING BUT BULLISH (just like it is now)…I’d also add that if you take the time to compare the current Soybean chart with the last week or two of these tops, you’ll note that a number of them are QUITE similar to the look we have today…
Soybean Tops Since 1980 – How fast and big they initially went down…
WHEN SOYBEANS ARE READY TO QUIT…
FOR THE FIRST 2-3 MONTHS IT CAN BE BRUTALLY BIG AND FAST ON THE DOWNSIDE….
Summary? Once they start down, and NEVER, I’ll reiterate, due to some all revealing bearish event or report, they are usually down at least 20+% within 6-8 weeks…in just about EVERY top we’ve had since 1980…Recheck the numbers above for yourself…When they’re done, they are DONE.
I keep banging away on this because I think the timing is perfect here…and now…and that this IS an incredible trade. It certainly does NOT mean I’ll be right but I can’t count the times I have seen this sort of short set up…Where everybody is all bulled up, and the market just keeps sitting there and sitting there…and picking up more and more and more hopeful longs…But finally it just comes unglued...and the move down from there is fast, steep, and BIG.
We’ll see. I urge you to call me if think the risk here is worth the potential reward.
All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Soybeans