- 2001: Volume 10, No. 2 Timing As a Trading Tool

In my eyes, a “trading tool” is anything that gives me an edge at any step of the trading process. I find using time and pattern analysis to be very helpful at the opportunity spotting stage.

Unlike many who view cycles and patterns to be predictive tools, I do not. Instead, these allow me to find situations where there is great potential for rewards. This does not mean the markets will respond as the evidence suggests, but it does put me in position to respond if the markets move from the “opportunity” to the “trading” stage.

My larger timing and pattern analysis tells me grains and oilseeds have potential to produce major opportunities going into the second and, maybe, third quarters of 2001. Seeing this in advance gives me time to plot potential trading strategies—and alternatives—depending on how well the markets respect and respond to larger timing.

“Cycles or other timing project...”
I commonly use a phrase similar to this to highlight a particular time frame as a target for a significant turn in the marketplace. Often, a graphic representation of all the evidence in the market would clutter the picture. Instead of risking confusing too many, I commonly opt to just use a version of the aforementioned summary.

Though quite involved, soybeans offer a fairly streamlined version of the kind of timing evidence I am often looking at when I make such statements. The reason I call this one “streamlined” is that so many timing forces project a fairly narrow time frame for a potentially larger-degree turn.

Timing points can act like a magnet to draw a market into a high or low. A single turning time gets my respect. But what gets me excited is an accumulation of multiple turns.

There are many timing counts an analyst can use. However, the criticism that “you can find a timing count for every day or week” really does not stand up to scrutiny. In addition to cycles, much of my timing is derived from the Fibonacci number series and a “circle of time” based on Gann methodology.

The March/April Time Frame
The late March to early April time frame marks a tremendous accumulation of key timing points in soybeans. There are so many that a legend of “Turns” was created to keep the picture straight.

The last week of March garners the most potential turning points. The 144- and 21-week Fibonacci turns are targeted into that time frame. The 90- and 45-week (Gann) turns are also due that week.

There are a couple more timing points supporting the idea of a larger low in or near the late-March time frame. The 13-week Fibonacci turn is due a week ahead of the other turns. And the 21-year turn is due in the first week of April.

The mass accumulation of turns points strongly to late March as the most likely time for a low. The window for bigger turns technically opened about the first of March—with a bigger low likely to be posted no later than early April.

As noted earlier, these turns can act like magnets to draw markets into them. And when markets respect the pull, the stage is set for reversals.

Soybeans and Soybean Oil
This winter, soybean oil was posting new multi-year lows and soybeans were threatening to retest or drop to the lowest level seen in modern times. And yet, soybean meal is technically in a bull mode. At first, there seems to be a major contradiction in the marketplace. Not so!

If you go back to the mid-1980s (not shown), you would see that soybean meal turned up in mid-1985—almost two full years before soybeans and soybean oil turned around. As these markets slid to their final lows, soybean meal pulled back in a major correction. History may well be repeating.

While others in the complex were pounding to major lows, soybean meal appears to be in the late stages of a major correction—of the bull move into last year’s high. It is technically a bull pattern as the last monthly reaction low has not been broken.

Figure 1:

A-B-C Correction
There are a couple reasons, in particular, to believe action since the 2000 high is a big, flat A-B-C correction. One is the personality of the current decline being fully consistent with a C-wave. C-waves tend to be sharp and devastating. And relative to recent action, the current slide fits the bill.

The other reason to suspect this is a large A-B-C is the action that preceded the current decline. The rally from last summer’s low traced out a textbook three-count pattern. This is the ideal pattern for a lesser a-b-c to form the B-wave of a bigger correction. Had the rally been part of the previous bull move, it should not have posted a clear three-count form—it should have traced out a five-wave advance.

Intermediate timing in soybean meal is much like soybeans. Thus, it is likely meal will attempt to complete a major A-B-C correction yet this spring. It would be ideal for May meal to post a climaxing washout into the 150 area or just below—in the late-March to early April time frame.

Posting a low in the March to early April time frame could set the stage for a third-wave advance in soybean meal. Keep in mind, this would be a third wave of an advance that started two years ago. Thus, if the pieces fall into place, the potential for a big move is great.

Figure 2:

Timing and Patterns
The timing and patterns in soybeans and meal make a powerful statement on their own. But the set up in this complex does not stop there.

Last year, major Gann and Fibonacci timing projected the July-August time frame for a possible major low in corn. The market respected the projected timing and turned right on schedule.

But what makes the spring-summer outlook particularly interesting, is that the intermediate timing in corn aligns almost perfectly with soybeans and meal.

Corn, especially the May and December contracts, track a 34-week cycle. This has been one of the most reliable of all intermediate cycles I track. And the next low was targeted, ideally, for the last week of March.

May corn has been bouncing along major support near 206 for almost two years. Another low in this area would set the stage at least for a rally back toward the winter high.

It would be ideal for the spring low to be posted in the 214 area or higher—making it just a retest of last summer’s low. Yet, it would not be a problem if a low undercut the 206 area—as it may well prove to be a just a jab. But if the spring low is higher (and a retest), it would provide a better argument for a bigger rally into the June-July time frame (a common period for seasonal highs).

Grains and Oilseeds
The immensity of the story in the grains and oilseeds is not complete until you factor in the wheat market. And of all commodities, wheat may be one of the best candidates to be the next big mover.

The nine-year cycle low in wheat was posted in 1999. This cycle has dominated the wheat market for over a century. But like so many cycles in recent years, it did suffer a hiccup along the way.

A nine-year low bottomed in 1986 (not shown). The market rolled up into 1988, but then cut the cycle short. Wheat came crashing down into 1990 to effectively double bottom with the 1986 low. But since this low was marked almost exactly at the midpoint of an ideal nine-year low, it became a candidate to be a short-cycle low. The key is what followed.

For the market to have reset the nine-year pattern with a half-cycle low, the next low should be marked on schedule. The 1990 cycle projected another major low in 1999—which wheat posted. But the story does not end here.

Figure 3:

Energetic Wheat
A look at the July Kansas City wheat weekly chart helps put the picture in perspective. The "beating" wheat has took this winter was likely just a pause on the larger degree.

Figure 4:

This market has been basing for over two years—storing tremendous energy. Plus, with wheat being early in the next nine-year cycle, the bulls have yet to have their day in the sun for this go-around.

If a turnaround propels the market through the long-term resistance near 357, there is potential for this market to flat-out explode. Whether it does or not, only time will tell.

One final point, when the market tried to turn up in January, I noted to the View On Futures readers that a breakout would be better a couple months down the road. Well, here we are! And historically, when wheat cleared early—March highs around mid-March or later, it has posted some of its biggest upmoves.

The Running of the Bulls?
If you have read this far, you may think I am bullish. I am not! The marketplace does not care whether I am bullish or bearish. It is the markets that are showing the bullish potential. This is an important part of using the timing and pattern tools to get an edge.

You do not get an edge from predicting markets will be bullish or bearish. Instead, these tools allow you to spot situations where the markets may offer great opportunities. When markets put themselves in position, the next challenge is to be ready to respond—if the markets come alive.

Glen Ring, one of the nation’s most respected market analysts, owns and operates an independent research firm for fellow traders. Glen is a noted author, speaker, teacher and trader with nearly 30 years of marketplace experience. He was editor of Futures Magazine’s Trends in Futures Newsletter for ten years before starting his own newsletter and daily update services, View On Futures. Interested traders can catch his commentary, insight and analysis by calling 319-268-1883 or via e-mail at blakec@forbin.com.