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Blowout at 5:33 AM Today 02/02/2022

A very large volume (large number of contracts) traded at 5:33 AM Central Time as the soybean contracts jumped about 12 cents in less than one minute.

There is no significant news released at that time of day. Argentina, Brazil nor the Corn Belt fell into the ocean. The world population did not double over night.

That price jump was caused by the CBOT liquidating some body’s short (sold) position in the soybean futures. The CBOT does liquidate positions when anyone does not meet their margin call deadline. In this case, it had to have been a very large trader because of the large number of contracts (volume) traded.

I hope it was not a commercial hedger. It is certainly highly likely it was a spec trader.

Now, other traders will decide to liquidate or have to liquidate because they know they are just about out of money.

When this forced and emergency liquidation of the shorts is over, which maybe several days from now, this market will fall so fast and so far, it will be something you will tell your unborn grandchildren about.

Does this mean this move, whenever it ends, will be the high for the year?

No. But there is a major crash and burn coming that will take one to two months from which to recover and rebuild demand. No user of soybean meal or oil is buying product now. They will wait for the correction

Remember all those option straddles brokers and merchandisers were recommending the past year. Those positions are turning very ugly also.

This is what is called a Toxic Market.


Some clarifications

JB wrote and me answering:

Did the liquidation of shorts cause the market to jump?


The potential of more mass liquidation of shorts will drive the price even higher short term?

The potential of more short liquidation is certainly there to run prices higher in the short run. It is also possible the liquidation over and down like a rock.

Then we will see the big decline in price you referred to.


Or am I totally backwards on all of that.

Nope, you nailed it.

Thank you for your time.

Thanks for the business!


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