In the last 12 months, crude oil prices have jumped by more than 100% from $9/barrel in November 1998 to over $25/barrel by October 1999. Gold prices jumped by more than $83/oz (30%) in just three weeks when the International Monetary Fund and European central banks made policy decisions to stop liquidating gold reserves.
Could the soybean market be next for a 100% rally? Not likely, but our time cycle analysis does suggest that soybean prices have put in a major low.
Long-term monthly soybean charting shows major lows every 12-13 years with major lows in 1962, 1975, 1986 and most recently in July 1999 (see printed article).
The low in July was the lowest price for nearby soybean futures since December 1973. Another key time cycle to watch is a four- to six-year cycle of lows. Long-term charting shows lows in 1986, 1991, 1994 and July 1999.
The price action since suggests a major low in soybean prices. We now anticipate an up-trending market. Look for a series of higher highs and higher lows to develop in the next two to three years.
Shorter-term price analysis shows that, during the last year, the actual low occurred at $4.01 on July 5, 1999. Nearby soybean futures then rallied $1.13 higher in the next nine weeks with September CBOT soybeans hitting an intermediate high at $5.15 on Sept. 7, 1999. This was followed by a nine-week correction to a low in late October. The low in late Octoberheld well above the July 9 low, setting up an important pattern of higher highs and higher lows.
The July-to-September rally was an Elliott five-wave rally to the top and suggests that the first major Elliott leg up in soybeans (Wave I) is complete. The nine-week price correction to the late October low is viewed as the completion of the corrective Elliott Wave II. The $5-5.15 price level is short-term resistance with major resistance at $5.25. Two closes above $5.25 will confirm a major four-year, 12-year and 24-year low in soybean prices.
Our earlier short-term time cycle analysis did suggest a potential low during July 1-9, with the actual low coming on July 5, 1999.
As we look at the balance of 1999 and ahead into the year 2000, key weeks to watch for a major change of trend in the soybean market include Dec. 24, 1999, Jan. 28, 2000 and March 3, 2000.
Could the soybean market repeat the price action we have witnessed in the crude oil market in the last 12 months? It's not impossible, but it's unlikely. It would take crop production problems in the Southern and Northern Hemispheres and record demand to continue. Then again, in December 1998, no one was forecasting a 100% price increase in crude oil.