Look at this daily chart for soybeans. There is a downtrend in place! Soybean prices have been down 6 of the past 7 days. Prices have closed below the Exponential Moving Average the past 5 consecutive days. Who would have ever thunk it? But the charts don't lie!
One of the reasons that new emerging trends are so hard to recognize is that they tend to occur at a time that our thinking is so strongly biased by past conditions to different, opposing or contradicting circumstances. The new trend flies in the face of long-held beliefs and ideas that we have accepted as certainties. Recognizing these biases is one of the most important skills we must develop as traders.But look at the volume-based selling in the lower panel (red line)! Even with that one strong day of upward prices when the lock limit down days ended, the Klinger Volume indicator didn't even flinch in continuing to point in a downward momentum path. That's strong selling! It seems difficult to imagine that there could be a soybean bear emerging when soybean prices have been rising so long. There will come a true test soon, as the price lows from March 10th are tested and hold for a consolidation (or renewed uptrend), or are tested and breached for a longer-term downtrend.
The soybean bull has been steadily pushing prices higher since mid-2006, so a pull-back of a few days hardly a bear makes. Still, the forcefulness of the recent sell-off must be considered as significant, especially in the face of continued strong global demand. My instinct tells me that this will likely develop into a consolidation rather than a long-term bear market. But the futures markets have humbled me more times than I can count! Those last two candles (today and yesterday) are both spinning tops, representing market indecision, and the long green one preceding them reversed a series of lock limit down days. Only time will tell!
