Rangey Corn Testing Key $3.41 Lower Boundary | RJO Futures

December 22, 2016 4:34AM CST

Since 06-Dec's rally above late-Nov's 3.60-area resistance, we have acknowledged 01-Dec's 3.41 low as our key longer-term risk parameter the market needed to sustain above to maintain a broader base/reversal-threat environment.  Now, after rejecting the upper-quarter of the past couple months' 3.41 - 3.69-range, the market has the opportunity to mitigate this bullish count with a failure below 3.41 or reinforce it with a rejection of the current lower-quarter of this range.

The hourly chart below shows the past week's relapse below 08-Dec's 3.50 corrective low that exposes at least the intermediate-term trend as down.  This former support has become new near-term resistance evidenced by Tue afternoon's 3.51 micro corrective high.  If something broader (i.e. sub-3.41 levels) to the bear side is unfolding, this 3.51 level is considered the tightest risk parameter the market now needs to sustain losses below.  A recovery above 3.51 won't be a reason to rush out and buy 4.00 calls, but it would be the first smaller-degree evidence that the market may be rejecting the lower-quarter of the 3.41 - 3.69-range just as it rejected the upper-quarter early last week.

Corn-H17-60min-Chart

Corn-H17-Daily-Chart

The daily log scale chart of the Mar contract above shows the 3.69-to-3.41-range that has constrained this market for most of the past three months.  It remains interesting that that upper-boundary is the exact 38.2% retrace of Jun-Aug's 4.53 - 3.25 meltdown while the lower boundary is the 61.8% retrace of Aug-Oct's 3.25 - 3.69 rebound.  IF something bigger to the bear side is gearing up, then a clear and SUSTAINED break of 3.41 is required.  Sustaining such a sub-3.41 break is important for a broader bearish count because, obviously, 31-Aug's major 3.25 low remains intact as another key support factor.

We would remind traders that on a very long-term basis the combination of Oct's bullish divergence in momentum (that, in fact, broke Jun-Aug's downtrend) and historically bearish sentiment are factors typical of major BASE/reversal-threat environments.  A break below 3.41 reduces this threat, but it doesn't eliminate it as long as 31-Aug's 3.25 low remains intact.  Herein lies the importance of the market "behaving" like a bear if it breaks 3.41.  If the market breaks 3.41, sucks a few more bears in, and then rebounds to a 3.51-bid, that "non-bearish" behavior would be more in keeping with the broader BASE/reversal-threat PROCESS we've been advocating since 03-Oct.

Corn-H17-Weekly-Chart

Corn-Weekly-Chart

On a weekly log active-continuation chart basis above, the market's early-Oct failure to sustain Jul-Aug's break below a TON of support between 3.47 and 3.18 is hardly a vote of confidence for the secular bear trend from Aug'12's 8.49 high.  Rather, it is totally CONsistent with our long-term count introduced more than two years ago in 14-Oct 2014's Technical Blog that contended that most or ALL of the secular bear market from 2012 was DONE and that the market would commence a BASE/reversal PROCESS that could span quarters or even YEARS similar to the Dec 2008-to-Jul 2010-period circled in blue in the monthly log scale chart below.

Could this market slip below 3.41 and even 3.25 or 3.15?  Absolutely.  And such failures would provide interim cause for end-users to pare or neutralize bull hedged and for producers to re-establish bear hedges.  But we would emphasize under those circumstances that we believe those actions and needs will be relatively short-lived, JUST like late-Aug's mere 2-day/3-penny break of Oct'14's headline low that ENDED this year's major decline.

These issues considered, a bullish policy remains advised for longer-term players with a failure below 3.41 required to threaten this call enough to warrant moving to a neutral-to-cautiously-bearish position.  Shorter-term traders with tighter risk profiles are OK to speculate cautiously from the bear side "down here", with a recovery above 3.51 threatening this call enough to warrant moving back to a cautious bullish position.  In effect traders are advised to toggle directional biases and exposure around 3.41 and 3.51 while also acknowledging a nearly 4-month lateral range with incessant whipsaw behavior and risk, an environment in which home runs are unlikely and cautiously bunting for a hit a more conservative way to go (the baseball analogy is for Chicago sports fans who might enjoy a little Cubs World Series recall/pick-me-up in light of how much the Bears and Bulls continue to suck).

As this is probably our last corn tech update before Christmas and New Years, the RJO Market Insights staff would like to take this opportunity to wish you the warmest of holiday greetings and a happy, healthy and prosperous New Year!

Corn-Monthly-Chart


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