1969 Reciting Kipling…
I think it is impossible for
Soybean Oil to stay this high…
Right now, everybody who follows the Soybean market is watching every second of the weather, and the forecasts, in the Midwest as we head into August’s podsetting stage (when the beans get made).
And with all the bullish hype that has been out there for months now, I would say that any solid up day in the Soybean complex is currently being regarded by analysts and the trading masses as a “Here they GO!” situation…I mean, let’s get real: We made the highs several months ago but the whole trading world is STILL bullish, and STILL talking about “If China buys,” and immediately dreaming about (today, here and now), “What if it gets hot and dry!?”
From here, Soybeans either FLY…or DIE,
They DON’T keep doing what they’ve been doing since early May…
Okay. There is NO question that if August turns in a scorching drought, the entire Soybean Complex is going to explode on the upside…BUT…if the weather stays relatively normal (“normal” meaning this is usually the case), with everybody still on the bull side of the fence, I think Soybeans are going to absolutely, totally and relentlessly GO IN THE TANK…just like I have seen them do so many times when bull markets ended during the 41 years I have been doing this.
As I have documented repeatedly, Soybean bull markets typically end by dropping 25-30% in a very short period of time…which implies a potential target somewhere in the $11.50-12.00 area (for starters)…And I CONTINUE TO THINK THAT IS WHAT WE ARE ABOUT TO SEE…I CONTINUE TO VIEW ALL OF THE ACTION SINCE EARLY MAY AS A TOPPING FORMATION…AND RESOLUTELY BELIEVE ANY GIVEN DOWN DAY NOW COULD BE THE BEGINNING OF THE COLLAPSE…It’s just the way this stuff happens…The market sits there and sits there and sits there… bouncing hard up and down…And then sideways is OVER…From one day to the next, for no apparent reason, it just starts down, which IS coming, and doesn’t look back…
I remain convinced that THE most overvalued commodity we trade is the Soybean Oil market and am therefore positioning there….and doing so using the Both Sides Strategy in that I am just as convinced that IF we get weather and they rocket to the upside, by the math, I should be able to recoup 100% of what I spend…and then be able to reposition short again at higher levels…OR…Soybean Oil is going to get crushed, and considering that this market is basically higher than it has ever been, this could mean very large profits. Obviously, If I am wrong, and this market just sits here sideways, it could mean losing 100% as well…But, I assure you, if Soybean Oil IS still here in the stratosphere several months from now, I WILL be reinvesting in the idea. THIS MARKET IS GOING DOWN. I will NOT be off of this trade.
Here’s how to do it…Again IT’S ALL MATH FROM HERE…and EXECUTING THE GAME PLAN OUTLINED ON THE CHARTS.
My supposition: During the next 30 days…and sooner really…this market is either rocketing into new highs, or it will start crashing…and keep crashing…It’s NOT going sideways.
And whether it's from here, or higher, this IS coming down. So if it does go higher, and you recoup 100%, you DO reinstate the position with new puts and calls...and then STAY SHORT.
The logic and numbers are very real here. Don’t just think, “This makes sense. I ought to...”, and then just WATCH.
Call me and do something with this…
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: Soybean Oil