On March 3rd May beans surged to $15.86 ½!
It's been a great ride!

What are the odds the high of $15.86 ½ made on
March 3rd is the high for the year for May beans?

Every agricultural trader and producer knows that soybeans have soared since last August. From August 16, 2007 to March 3, 2008 May beans surged $7.49 ½, from $8.37 to $15.86 ½.

The high price of soybeans appears to be winning the battle for planted acres for 2008. I am reading some estimates that 2008 bean acres may be 9 to 11 million acres higher than 2007. If there is not a drought and yields are close to trendline, an increase of 11 million acres would result in ending stocks of roughly 275 to 300 million bushels and a possible Stocks to Usage Ratio in the neighborhood of 9.2 to 9.9 percent. This Stock to Usage Ratio compares to the 5.3% STUR projected by the USDA for the 2007 crop year in their February Report.

This means the USDA March Planting Intentions Report looms large on the horizon.

Bull market highs are useless if one only watches the surge to a peak and then watches the collapse that inevitably follows. The limit down moves during early March are following this pattern.

A focus of my 2005 Forecast was the projection of a volatile bull market environment for corn and beans that would last for several years. A focus of my 2006 and 2007 Forecasts was that a bull market surge would complete in 2008.

Harmonic Timing's 2008 Forecast strongly reiterated the expectation of a bull market surge to a significant high in both corn and beans during 2008. The following chart is taken directly from our 2008 Forecast and shows the 27-28 Year Cycle to important highs in soybeans.

Let's now take a look at the high of March 3rd and see if the odds favor it as the 27-28 Year High, the high for the year. Let's start by looking at three factors that argue March 3rd may have been the high for the year.

The last cycle high of the 27-28 Year Cycle was during November 1980. The next cycle high is projected for 2008. An ideal measurement from November 1980 projects a high for May 2008 +/-. A window of one or two months for such a long cycle measurement suggests the high for the year may have been made on March 3rd.

Let's take a look at a second longer-term cycle.

This chart is taken directly from our February issue of Harmonic Timing of Soybeans. It shows an interval of an 86-Year Cycle in soybeans measured back to the depression era low of November 1931. This cycle last bottomed during July 1999 and projected a cycle high during February 2008 +/-. This cycle likely peaked on March 3, 2008.

When major long-term cycles such as the 27-28 Year Cycle align with other strong cycles such as the intervals of the 86-Year Cycle, the result can be a major spike high. These cycles aligning together may be what caused the spike high during early March.

Besides our cycle analysis, contrary opinion of market sentiment suggests the high of March 3rd was important.

During early March the euphoria in the marketplace was palpable. Bullish market sentiment as measured by MBH Commodity Advisors Inc. was at historically high levels. This euphoric attitude was reinforced by bullish market sentiment as measured by Elliott Wave International. Again, their bullish market sentiment data was at historically high levels.

This kind of euphoria resulted in commentary by some analysts stating that prices could double or perhaps even triple from the lofty levels of early March. Contrary opinion of market sentiment signaled there was potential for the high of March 3rd to be an important high…perhaps the high for the year.

Now let's look at three factors that argue March 3rd may not have been the high for the year.

As stated above, our annual Forecast for 2005, 2006, 2007, and 2008 all contain analysis about a 27-28 Year Cycle that peaks in 2008. Also as stated above, intermediate-term cycles are best used to time the turning points of these larger cycles.

If March 3rd was not the high for the year, are there cycles that can help focus on those times when the high for the year is likely? My 2008 Forecast uses historically reliable intermediate-term cycles to project significant Clusters of Cycle Turn Windows. One of these Clusters will be the high for the year.

There are two Clusters of Intermediate-Term Cycles in the weeks and months ahead. It is possible the 27-28 Year Cycle may align with one of these two Clusters and the high for the year may be made at that time.

The above 20-26 Month Cycle is one that I have used since projecting a Seasonal-Harvest Low for early October 1998. It is an interval of W.D. Gann's 45-Year Cycle. The 20-26 Month Cycle is one of a Cluster of three cycles that have Cycle Turn Windows projected for the not too distant future. A significant turning point in soybeans is expected during this Cluster of Cycles.

As you can see on the chart, the 20-26 Month Cycle is quite reliable. Of the six Cycle Turn Windows since October 1998, the cycle has aligned with important highs and lows five times. This is a reliability factor of 83%.

This dominant cycle is one of a Cluster of Cycles that defines one of the two remaining critical times when soybeans may make their high for 2008.

Now, let's look at pattern. The following is a weekly basis chart is of cash beans at central Illinois from the low of October 6, 2006 to the present.

Elliott Wave Patterns can be a useful tool to determine where a commodity is in relationship to its larger pattern. The above chart shows there is a large bull market pattern unfolding from the low of October 2006. The initial impulsive bull market rally completed on July 13, 2007. Beans then traced out a corrective decline for several weeks. The Swing 2 low was completed on August 17, 2007.

The Swing 3 impulsive rally from August 17, 2007 subdivided into five minor swings labeled i, ii, iii, iv, and v. This pattern appears complete as of the high of March 3, 2008. This high was made in the Ratio Cluster Zone of $14.33 to $14.91. The labeling of this pattern indicates March 3rd was a Swing 3 high and not the completion of the bull market.

If the above statement is accurate, it indicates the current decline is a Swing 4 decline that will be followed by a Swing 5 rally to new historic highs.

The following is a daily basis chart of May beans that takes a close-up look of the rally from August 16, 2007.

The above chart shows the bull market pattern that unfolded from the low of August 16, 2007 in May beans. This low was the Swing 2 low of the larger pattern. The initial impulsive rally of the larger Swing 3 completed on September 27, 2007. Beans then traced out a corrective decline, and the low was completed at the Fall Harvest Low of October 8, 2007.

The smaller Swing 3 rally from October 8, 2007 completed at the Winter High of January 14, 2008, and was followed by a smaller Swing 4 correction to the Winter Low of January 23rd. The smaller Swing 5 rally began on January 23rd and completed on March 3, 2008.

An hourly chart shows the rally from January 23rd to March 3rd likely subdivided into smaller swings labeled i, ii, iii, iv, and v. When this pattern completed it signaled that the five-swing rally from August 16, 2007 was complete. The completed pattern also signaled that the larger Swing 3 rally was complete.

If the above swing pattern analysis is accurate, it indicates the decline from March 3rd is a Swing 4 decline that will be followed by a Swing 5 rally to new historic highs.

Ernie P. Quigley
March 13, 2008

The NFA requires us to include the following statement: "Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown." Past performance is not an indication of future performance.

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