With two weeks to go until 12-Aug’s key crop reports, the market has yet to provide the evidence needed to diffuse the peak/correction/reversal count confirmed in 01-Jul’s Technical Blog. Per the daily chart above, 12-Jul’s 4.60 high remains as the start of the C-Wave down of a larger-degree correction lower or 3rd-Wave of a more protracted reversal lower. The market’s failure to sustain losses below 4.61 will render the sell-off attempt from 17-Jun’s 4.72 high a 3-wave and thus corrective affair that would warn of a resumption of May-Jun’s uptrend that preceded it. Per such, 4.61 remains intact as our key long-term risk parameter from which non-bullish decisions like long-covers, bearish punts and producer bear hedges can be objectively based and managed.
From a shorter-term perspective, the hourly chart below shows the developing potential for a bullish divergence in short-term momentum. Last Wed’s 4.37 high serves as the latest smaller-degree corrective high the market must now sustain losses below to avoid confirming this bullish divergence that would END the decline from 12-Jul’s 4.60 high and possibly the C-Wave of the broader correction from 17-Jun’s 4.72 low. For traders with tighter risk profiles playing this market very close-to-the-vest, this 4.37 high and 02-Jul’s 4.20 obviously key low serve as the key directional triggers heading forward. Further erosion below 4.20 would reaffirm at least the C-Wave of a correction down and, at most, the 3rd-Wave of a more protracted reversal lower.
From a longer-term perspective, traders must acknowledge and have a game plan for EITHER a deeper correction or reversal below the 4.20-to-4.10-range due to:
- the return to historically frothy bullish sentiment/contrary opinion conditions
- the market’s rejection thus far of the general 4.50-area that is still arguably the upper boundary of an incessant lateral range that dates from Oct’15 and
- the market’s rejection of the (4.60) 48.2% retrace of 2012-2016’s 8.49 — 3.15 bear trend.
By the same token, the market:
- is coming off a confirmed bullish divergence in MONTHLY momentum that reaffirms our major, multi-year base/reversal count from Aug’15’s 3.15 low
- remains above the 4.20-to-4.10-range that’s a key former resistance threshold from the past two year’s that, since broken, serves as a key new support candidate within
- an arguable 3-YEAR uptrend.
Suffice it to say that there remain longer-term directional arguments both ways. What’s most applicable however is the intermediate-term downtrend that could still morph into a longer-term move south and a more protracted assault on the lower recesses of the nearly 5-year range. And the absolute keys are recent corrective highs at 4.37 and especially 4.61 from which a bearish tack can be objectively based and managed. Producers have clear and concise risk parameters from which to base and manage bear hedges while end-users have these same levels, above which, to reconsider bull hedges.
Over the next two weeks we don’t envision much movement either way, but if we had to bet, we believe it’ll be lateral-to-lower. And perhaps this price action will leave new levels around which to fine-tune this game plan. But for now, a cautious bearish policy remains advised with a recovery above 4.37 required for shorter-term traders to step aside and commensurately larger-degree strength above 4.61 for long-term players to take defensive steps. In lieu of such strength we anticipate continued lateral-to-lower prices in the period immediately ahead.
With the exception of market sentiment/contrary opinion (which we’ll address below), the technical construct of Nov beans is virtually identical to that detailed above in corn. Late-Jun/early-Jul’s bearish divergence in momentum left 18-Jun’s 9.48 high in its wake as the end of a 5-wave Elliott sequence from 13-May’s 8.15 low and start of a larger-degree correction or reversal lower. The past three weeks’ lateral chop detailed in the hourly chart above looks to be that of a (prospective b-wave) triangle that warns of a resumption of the initial downtrend from 18-Jun’s high to 09-Jul’s 8.90 low.
What lies below that 8.90 is anyone’s guess at this point; just slightly more c-Wave correction ahead of what would be an outstanding risk/reward buy, or a 3rd-Wave down to severely pressure May’s low? What we know with much greater certainty is where the market should NOT trade per either of these bearish counts: above 19-Jul’s 9.24 smaller-degree corrective high for shorter-term traders or 12-Jul’s 9.32 larger-degree corrective high for longer-term players. Recoveries above these levels would threaten and then negate any broader bearish counts, raise the odds that that the sell-off attempt from 18-Jun’s 9.45 Globex day-session high is a 3-wave and thus corrective affair and resurrect a major base/reversal count that could be major in scope. Per such the market has been accommodative in defining 9.24 and 9.32as our new short- and longer-term risk parameters from which non-bullish decisions like long-covers and bearish punts and hedges can be objectively based and managed.
From a long-term perspective, the combination of:
- a confirmed bullish divergence in MONTHLY mo
- historically bearish sentiment
- the prospect of a complete and major 5-wave Elliott sequence down from Sep’12’s 17.89 all-time high and
- the Fibonacci fact that the 2012 — 19 bear market remains of similar 53%-to-55%-length to all three former bear markets
maintains the odds of a major, multi-year base/reversal environment. Even within this major process however, there’s plenty of room for corrective relapses that could be relatively major in scope. For instance, a 61.8% retrace of May-Jun’s 8.15 — 9.48 rally in the Nov contract on a log scale doesn’t cut across until the 8.64-area. And the correction, at that point, could easily extend a lot deeper. What isn’t an unknown are the recent corrective highs and risk parameters from which traders can objectively base and manage what we suspect is an interim bearish/corrective policy and exposure.
In sum, a bearish policy remains advised with a recovery above 9.24 threatening this call and further strength above 9.32 negating this call and resurrecting the major bull. In lieu of such strength, we anticipate further lateral-to-lower prices in the period ahead. We suspect price action in the next two weeks to yield new data point that would perhaps allow us to fine-tune directional triggers heading into 12-Aug’s report, and we will do so accordingly.