As I mentioned in my analysis of cash corn, I’m switching to a index with more history for this look at cash soybeans. Instead of the usual cmdty National Soybean Price Index (NSPI), I’m looking at a cash index listed on the Minneapolis Grain Exchange (ISY00). At the end of December the ISY00 was calculated near $12.70 (the NSPI was calculated at $12.69), having easily cleared the price target near $12.30 during the month. This price marked the 50% retracement level of the previous major (long-term) downtrend from $17.48 (August 2012) through the low of $7.12 (September 2018).
It’s interesting to note the ISY00 (as well as the NSPI) established a bullish signal at the end of October as its monthly crossover posted a bullish crossover below the oversold level of 20%. From there the pattern has been a relatively clear 5-wave uptrend, until the December 2019 through January 2020 timeframe. This looked to be a classic 2-month reversal signaling a Wave 5 peak. What made this more interesting is the breakdown of the cash market following the announcement of the Phase 1 trade deal between the US and China on January 15, 2020. The ISY00 closed January on its monthly low of $8.19, completing a bearish 2-month reversal. The selloff extended to a low of $7.73 during March, just as the futures spreads started to move from neutral-to-bearish to bullish.
After consolidating through July 2020, the ISY00 exploded during August to a high of $9.01. Not only did cash soybeans post a bullish outside range, it established a new 4-month high and took out the January peak of $8.96. Since then the ISY00 (and NSPI) have not looked back as commercial buying continues to provide support to the market in general. And while monthly stochastics are well above the overbought level of 80%, actually well above 90%, the next upside target is $13.52. This price marks the 61.8% retracement level of the previous downtrend.
Is the rally in cash soybeans nearing an end? It’s impossible to say, but based on Newsom’s Market Rule #6 (Fundamentals win in the end) it looks like there is still ample room to the upside until we see a bearish change in supply and demand. At the end of 2020 the soybean market Cost of Carry table was a sea of red, meaning futures spreads were inverted as far as the eye can see, implying no bearish change in trend is on the horizon