As most of you know, we focus on swing trading opportunities both for our own accounts as well as the money we manage. We do this for several reasons and we’ll include a short-term setup at the conclusion of this piece. However, today’s main focus will be on using Commitment of Traders analysis within an existing trend to determine an entry point and time in the current soybean meal market. The lesson, however, works across all commodity markets for which Commitment of Traders data is reported.
There are two issues to look at this week in the soybean futures market. First, I’d like to discuss the seasonal pre-planting characteristics of the soybean market, how they’ve changed over the last ten years and what the current situation looks like. Secondly, I’d like to use this setup to explain the difference between market forecasting and trading program design with a special focus on soybeans and the market’s natural fear based reactions.
This is a critical point in the soybean futures’ seasonality due to the approach of the Brazilian harvest and the spring planting intentions here in the U.S. Brazilian soybean production has been expanding at unprecedented levels, setting new production records in ten out of the last twelve years. A final harvest number near projections would also keep that streak rolling. The Brazilian harvest has just begun but recent rains have already dampened the early harvest projections above 95 million metric tons(mmt) and are currently suggesting a number closer to 91mmt.