Soybean Optimism Now Extreme

With soybeans now in a parabolic race to the mean, the optimism index which is tracked by Sentiment Trader is now showing levels are at "Excessive Optimism".  As doom and gloom as most farmers were back in February, one would believe that they are optimistic now. 

When public opinion reaches a consensus, it is usually wrong.  Farmers get too bullish after prices have risen, and too bearish after they have already fallen.  Because of that tendency, Sentiment Trader can see the extremes in opinion right before major changes in trend.  When the public reaches a bullish extreme, a great majority thinks prices will keep rising, but we most often see prices decline going forward instead. 

Farmers who met with me back in February and March may recall that I said that there has never been a major rally occur without excessive pessimism.  Look where the index shows where we were back at the end of February, first of March!

Now, back to today's excessive optimism.  There is a lot of farmer buying now, but I would suspect that most of the buying is farmers exiting their short positions.  To do so, they must buy.  Eventually, through all the buying will end as the market will simply run out of buyers and the bears will again regain control.  This could happen very soon.