Lunchtime Meanderings

Posted by Nogger - a legend in his own mind at 15:21 | Categorized as

04/07/12 -- The US market is closed for the Independence Day holiday, so there isn't too much action going on in Europe without Big Brother available to hold it's hand.

Last night's close in Jul 12 CBOT soymeal of USD454.10 was the highest close for a front month in history, just surpassing the previous record of USD453.90 set on 11th July 2008. Out of interest the all-time high for soybeans was set on both the 2nd and 3rd of July 2008 at USD16.45 3/4.

We have a little way to go to beat that yet, although it's only a fraction over one limit up move away. There are probably many more who would currently bet on there being plenty of time for that to happen yet this month rather than not. Me included.

Perhaps the most bearish factor in the soya market at the moment is that there are no bearish factors. Then again, I've just thought of a one. There is a strong historical trend for the soya market to top out in Jun/Jul, just as the market often bottoms in Jan/Feb.

Of course it doesn't happen every year, if it did that would be boring and we'd all be living in the Maldives. It may be worth considering though that the bottom of the market this year was in January (hums theme from the Twilight Zone).

Want to know what the soymeal seasonal chart looks like in comparison to this year? It looks like this: CBOT Soymeal.

Pretty interesting. Note how the more recent 5 and 10-year lines show a higher degree of volatility than the 15-year average. For what it's worth, the 20-year average shows less volatility again, and the 30-year average even less. The difference between the top and the bottom of the market is getting larger it would seem with each passing year.

Note also that these highs and lows are measured in percentage terms. It would be expected that the difference between the high and low in dollar terms would be larger in a year when soymeal averages say USD400/tonne as opposed to USD250/tonne. These are percentage differentials however, which seem to back up the notion that our markets have never been more volatile than they are now.

"The four most dangerous words in investing are: It’s different this time.” - Sir John Templeton, legendary investor.