Time for a setback in soy futures?

Updated: Sep 21, 2020

Please let me start with the whole picture of todays analysis. Overall I have a long term bullish outlook for commodities or lets be more specific and say grains like soy, wheat and corn.

I even think grains could become the next hedge against equities and of course inflation, in times where bonds doesn't work anymore as a hedging strategy.

As we all know we had a great bull market over the past decade and usually bull markets in equities appear when there is a bear market in commodities, like the following graphic from Macrobond also shows. Overall we are at the lowest point if we compare the spread between commodities and equities.

But the past few weeks we saw some decent strength in the grains market. For the last month soy futures are up 14 %, corn futures are up 15 % and even wheat futures are up 11 %.

But the next step I anticipate is a setback in these markets. I make this point based on my cycle analysis, the COT report and the overall price action.

If I see a bearish confirmation here in the futures market I will act appropriate, like also Jerome Powell sys like every time he's on stage.

Here's another grafic of the latest COT report for soy futures.

We see huge buying power by Large Speculators. During the last five years every time we saw on the one hand that amount of buying power by Large Spec. and on the other hand Commercials take the opposite position, as their hedging strategy, we saw weakness in the soy futures market.

If you take a closer look at my cycle analysis, you can also see that we'll entering a more bearish phase real soon, which would also give us some bearish momentum.

But don't get me wrong. As with all my analysis I will only execute a position if I get a confirmation of my idea by the overall price action in the underlying market.

I also made a discovery in the Nasdaq Futures CoT report this week, which I would like to share with you. Before that I have to admit that my strategy in the futures market only involves entering long positions and staying away from bearish periods, related to my cycle analysis.

You may can interpret the current CoT in both ways but the amount and change of Large Spec. and Commercials is quite impressive and very rare.

Thanks for reading and stay safe!