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(March 7, 2002) SOYBEANS: MAY SOYBEANS--News that the U.S. and China had reached an agreement on imports of genetically modified beans helped catapult soybean futures to a nearly a five-month high this week, which significantly improved the technical posture of this market. A decline in the US. Dollar, Argentina's imposition of an export tax on farm products and expectations of a supportive USDA supply/demand report tomorrow are also giving the beleaguered soybean bulls a much needed reprieve. While the ongoing South American soybean harvest could temper the new enthusiasm, it appears this market may be in store for further gains. Although the stochastic is reading overbought, the Fibonacci extension points to $4.90/bu. as the next upside target. It was not a good week for the bulls, as the specter of non-threatening Midwestern weather and liquidation in front of next week's USDA Crop Production and Supply/Demand reports collapsed the market to a 2-month low. Early estimates for a 2001/2002 crop near 2.8 billion bushels, despite the late planting and poor summer weather, appeared to be the catalyst dampening the bullish enthusiasm experienced during June and July. The continued absence of China from the import market and slowing demand for soy meal also contributed to the selling, as did the deteriorating technical picture. Indeed, the daily bar chart displays a bleak outlook for the new crop November contract. The break out from the two-week congestion pattern now sets the stage for further weakness, most likely into the chart gap left near $4.50/bu. Considering the huge speculative long position that still remains, we anticipate more capitulation by the die hard bulls prior to next week's USDA reports, which may be more bearish than most.

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