Multiple Factors Converge in the Meats

Pullbacks

July soybean meal (SMN3:CBOT) is triggering Monday out of a classic pullback-from-high setup. Here are the hallmarks of a classic pullback setup. First, you have a market that has demonstrated momentum. Meal began accelerating in late March and hit a contract high on April 17. Second, the market pulls back for three to seven days. Meal entered the week in a three-day pullback.

Ideally you'll see a range-contracting -- inside days where the high is lower and the low is higher than the previous session. Soybean meal logged an inside day Friday. A market will then "trigger" when it trades above the high of the low bar in the pullback and make a decisive move to the upside. This is what's occurring in Monday's session in what appears to be a classic continuation of the uptrend.

July coffee (KCN3:NYBOT) also closed at a two-month high last week and is in day four of a pullback off the high. Coffee has an upside seasonal bias, as sellers sit it out on the sidelines, waiting for the frost season in the world's largest producing nation, Brazil, to pass.