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Dead-cat bounce watch is on

10/14/2013 @ 1:28pm

Price action, since October 1, was a good start on the way to generating a sell signal on the dead-cat bounce for pricing soybeans. The harvest low, October 1, appeared to be right on time.  The average date is October 2, on the long-term charts. Since October 1, there were eight days higher than the harvest low. I always look for at least 10 days higher. Those days can include some days lower than the previous day, as long as they do not include any days lower than the October 1 low.

At least one of the days higher was 35 cents over the low. That is one of the criteria to complete the bounce, but only if 10 days or more have elapsed. In this case, the high day came after only four rally days. In the recent past, in the years 1997 and 1998 the market shot higher within a week, only to pull hack before the 10-day rule was achieved. In those years the rally resumed later, making  a new high and giving sellers a second chance that was better than the first one. 

Two fundamentals are pulling soybean prices in opposite directions. One is the recent government report showing a very tight supply of soybeans prior to the South American crop becoming available. This has had soybean prices moving higher for most of the past month. The negative factor is that most reports are that the 2013 crop will be better than most of us thought before harvest started. Better-than-expected yields could offset some of the supply problems that traders were basing predictions on.

My harvest so far has been limited to a few acres of my corn and soybeans that my custom harvester has done. In the case of corn, the yields were right at my APH. The soybeans have been better than the APH yields. In both cases, the performance was surprising considering that we went two months with no rains of over an inch.

In any case, do not give up on the dead-cat bounce. Price action on Friday took prices within 2 cents of triggering the need to reset the count days on the chart. If prices Monday are higher, only two more days will be required to get the sell signal. If Monday’s closing price is lower by more than 2 cents, it will be necessary to start counting over. It is possible that the next bounce could start at a lower level than the recent one. I hope that does not happen!

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