You know the expression, "You never see the bullet that kills you"?
Well, in late August, this saying aptly applied to the mainstream financial analysis surrounding soybeans, when it was "taken out" by a sharp and sudden downturn.
Here's a brief recap: On August 30, soybean prices soared to a three-year high. "Fundamentals" were suggesting a perfect bullish storm still ahead:
- "US crop forecasts are falling, and that will continue to support the market." (Bloomberg)
- "Soybeans extended their rally on speculation that hot, dry weather in the US, the world's largest grower and exporter, damaged crops more than forecast by the government. Markets rise on yield worries." (Bloomberg)
YET, on August 31 none of it stopped soybeans from turning down in a stomach-churning, 20% sell off to an 11-month low before pausing on October 4.
That's the weakness of forecasting the markets with "fundamentals": Usually, you simply end up rationalizing the current trend -- and miss the turn. But while there is no fool-proof market forecasting method, Elliott wave analysis does a much better job at seeing trend changes ahead.
On August 30, EWI's Commodity Specialty Service editor Peter DeSario presented the following chart of soybeans that showed a large "expanded flat" Elliott wave pattern nearing completion along with this timely insight:
"An imminent top is expected... Another three to follow the completed wave (X) appears to be an expanded flat that could complete with the next reversal indication and be followed by a substantial decline."
"Prices could have registered a top of lasting significance at Wednesday's high."
A 20% selloff that followed speaks for itself. Note that the forecast didn't mention a single "fundamental" factor.
Find out the newest technical insights into soybeans -- and many other commodity futures -- with EWI's Commodity Specialty Service today >>
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