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Big soybean move coming?

09/11/2013 @ 10:23am

November CBOT soybeans shrugged off the majority of Tuesday's intraday losses to close only marginally lower. Traders are positioning ahead of Thursday's monthly supply-and-demand report from the U.S. Department of Agriculture, a report that will be closely watched by traders.

Recent hot and dry weather is expected to have taken a toll on the still-developing soybean crop. Analysts expect the U.S. Department of Agriculture to cut projected domestic soybean output this year by 3.3%, to 3.15 billion bushels, from its forecast last month, in its supply-and-demand estimates due Thursday, according to a Wall Street Journal survey.

The market has rallied sharply since early August as traders began to price in anticipated yield loss due to the re-emergence of drought in some areas of the Farm Belt.

In recent days, technically, Nov soybean futures have shifted into a sideways, consolidative phase following the massive price run-up into the late August price peak, which stalled just shy of the contract high. Near term, the market is heavy, but expectations of yield loss will minimize downside action for now. The consolidative range trade in recent weeks has been confined between major support at $13.35 and major resistance at $14.09 1/2.

On the upside, a strong ceiling of resistance is seen from $14.09 1/2-$14.08 1/2, just ahead of the contract high at $14.09 3/4, which was scored back in September 2012. The bulls have made two runs at the contract high in recent weeks, but failed both times.

On the downside, the market is holding above important gap support, for now. But, unexpected bearish news would see a quick test of the old gap from Aug. 23-Aug. 26 that remains "open" on the daily chart. The market partially filled it last week, but the gap remains open to the $13.31 1/4 level, which is support and a target for the bears. If the contract were to close under that gap it would be a bearish chart signal and confirm an intermediate term top on the daily chart.

Heading into the USDA report, trade likely will remain within recent ranges. But, the market is waiting for fresh news to drive directional plays. The market has been coiling higher and lower since Aug. 27 within the above mentioned range and is vulnerable to a big, volatile move later this week.

$14.09 3/4 -- the contract high 
   $13.65 1/2 -- the 10-day moving average 
   $13.27 1/2 -- the 20-day moving average 
   $12.75 1/2 -- the 40-day moving average 
   $9.22 1/2  -- the contract low 
 
DECEMBER SOYBEAN MEAL -- combined pit and electronic trading

December CBOT soymeal closed with modest losses Tuesday. The market remained within recent ranges as traders are awaiting Thursday's key USDA report. For now, the overall technical trend remains bullish, and recent downside probing can be considered corrective. A minor top and resistance has formed at the contract high set on Aug. 27 at $445.80. It would take a sustained rally move above that resistance ceiling to kick-start the longer-term uptrend back into action.

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