Soybean top or year-end profit-taking on thin volume?

Wow! In the closing seconds of the day, soybeans sold off from the new overnight high, nearly reaching lock limit down, a top to bottom price fluctuation of more than 60 cents! I had to change to a 30 minute chart to give you a good look at what that looked like. I must confess that I took no trades today, including this one. The slow sell-off early on was unconvincing, at best. However, it accelerated (literally) in the closing seconds of the trading session, and I don't place new trades later than 10 minutes before the close of the trading session, especially prior to the weekend.

Holiday trading is also notoriously thin, so liquidity may become problematic. However, I have found that soybean trading this week has been very liquid and charts have been very smooth, clean to read, and easy to trade. I have had no complaints. These types of sudden price moves and shocks are not uncommon during the sometimes erratic thin trading conditions around holiday weekends.

What was the cause? Without checking the various news sites for fundamentals-related news, I would bet that it was caused by traders liquidating their long positions to take their profits in this calendar/tax year. Readers may recall that I have said that after the parabolic rise in soybean prices on Wednesday, I have anticipated a consolidation of several days or a significant correction. Never did I imagine this, however.

Rick Santelli, on CNBC, said that a tax-year profit-taking retracement was the cause of the sell-off (small compared to this soybean one) in crude oil today, and he implied that the soybean sell-off was for the same reason. Otherwise, this may be a blow-off top, but I have my doubts.

The second chart shown here is my tick chart. Note at the bottom the time markers. The grain markets close at 12:15 pm local time. Thus, this entire sell-off occurred in only about 1 minute of time. One minute! These types of things typically only happen at the end of a year, quarter, or when a global shock hits the system. Soybeans came to within less than one cent of its lock limit down price.

If this sell-off was due solely to profit-taking, then I would expect that many of these same traders will buy new positions after the first of the year, or perhaps even on Monday to carry over into the new year, and the price of soybeans will rise again. This would be a tremendous opportunity to buy into the soybeans bull market.