Soybean Chart Analysis

Ever since that last USDA report, wherein the agency surprised the market with a big jump in planted acreage, the beans have been on the defensive. That report, plus the continuation of very good growing conditions changed the dynamic completely in the beans. Prior to the report, the focus of many traders was the continued tightness in old crop carryover. Simply put, the market was of a mind to ration demand so as not to run out of available bean supply prior to this year's harvest.

It was that old crop carryover tightness that had been the driving factor particularly in the July and to some extent, the August bean contracts. New crop November had been yanked, tugged, pulled and generally distorted by the buying in those former mentioned contracts.

Now that the Quarterly report is out of the way, traders are looking forward to a massive harvest based on USDA weekly conditions ratings, as well as field reports. The result has been a complete and rapid sentiment shift that has caught many of the hedge funds leaning on the long side of this market. They are getting out of Dodge very rapidly based on what we are seeing in the weekly Commitment of Traders reports. However, as of last Tuesday, they were still net long. I am sure that has changed by now as the market has lost some 82 points since then.

I expect to see this week's COT reports showing them to having moved over to the short side of the market. 

The market is now anticipating this coming Friday's Supply and Demand report. Based on what we get out of that, we could see even more weakness if end users feel that they can buy, "Hand to Mouth" to meet their needs as they wait for harvest to begin. While the beans are certainly not out of the woods, as they are essentially more dependent on August weather compared to corn, it is not inconceivable that we could see them near the $12.00 level without some sort of bullish surprise in this report ( or a shift to a hot, dry weather pattern across the corn belt).

Indicators on the weekly chart are pointing lower. A breach of the $12.00 support zone would suggest an initial move to $11.50 and then to $11.00- $10.80 should that fail.

On the upside, this week's gap lower is initial resistance starting near $12.86 and extends to $13.00.

A quick note on gold - it is firm due to geopolitical events - first it was Ukraine, then it was Iraq, and now it is Israel and Hamas. One wonders, with the various commodity indices all retreating lower once again, how long the geopolitical concerns can keep it supported. Gold needs support from rising commodity prices.