If There's a Place & Time for Corn & Wheat to Peter Out, It's Here, Now

January 25, 2017 8:49AM CST

MAR CORN

The market's failure yesterday and overnight below Thur's 3.63 corrective low confirms a bearish divergence in momentum on the tiniest of scales that defines Fri's 3.70 high as the END of a nice little 5-wave rally from 11-Jan's 3.52 low detailed in the hourly chart below.  In this very, very short-term regard that 3.70 high serves as a very tight but no less objective risk parameter from which any non-bullish decisions like long-covers and cautious bearish punts can now be effectively based and managed.  A recovery above 3.70 will mitigate any peak/reversal threat, reinstate a 4-1/2-MONTH uptrend and expose indeterminable heights thereafter.

CLEARLY, the SCALE of this minor mo failure is insufficient to conclude anything more then another interim corrective setback within even Jan's portion of the 4-1/2-month recovery, with the market thus far only relapsing to a relatively huge area of former resistance from the 3.65-to-3.63-area that would be expected to hold as new support if something bigger to the bull side is developing.  HOWEVER.....

Corn 60 min

 

...the daily log scale chart below provides a ton of interesting stuff that warns that yesterday's admittedly short-term mo failure could just be the initial tipping point to a larger-degree relapse or even a resumption of Jun-Aug'16's collapse.

The factors that warn us to be very watchful for a broader peak/reversal threat from the 3.70-area are numerous:

  • yesterday's "outside day" (higher high, lower low and lower close then the PRIOR FOUR DAYS' ranges and closes)
  • the market's proximity to the 3.69-upper boundary of the range and resistance that has dominated price action for the past three months
  • the market's continued respect for the (3.69) 38.2% retrace of Jun-Aug'16's 4.53 - 3.25 collapse and
  • the Fibonacci progression fact that the rally from 01-Dec's 3.41-3/4 low spanned a length 61.8% of Aug-Oct's 3.25 - 3.69 preceding rally.

While the market has NOT confirmed a bearish divergence in even short-term momentum below 11-Jan's 3.52 corrective low, let alone below 01-Dec's larger-degree corrective low at 3.41, the list of technical facts cited above warns us of potential trouble for the bull.  If there's a place and time for this market to stem a developing reversal and re-expose greater weakness and vulnerability, we believe it is here and now.  And the market has been accommodative in identifying a specific and objective risk parameter at 3.71 from which to make such a bet.

Corn Daily

 

Corn Weekly

From a very long-term perspective we would remind traders of the still-unfolding major base/reversal environment we believe is unfolding from Oct 2014's 3.18 low that could still include a ton of aimless, whippy, frustrating, rangey price action that would continue to wreak havoc with trend followers.  Under such generally lateral price action no one's likely to be hitting any home runs on a "big move" unless, possibly, the market recoups yesterday's 3.71 high and accelerates thereafter.  Per such a more conservative approach to risk assumption remains urged.

In sum, a cautiously-bullish policy remains advised with weakness below at least 3.52 and preferably 3.41 required to threaten or negate this call.  A recovery above 3.71 will reinforce this count and expose further and possibly surprising gains thereafter.  For those willing to take more of a scalpers approach however and the whipsaw risk that comes with it, we believe a cautious short position from around 3.67 OB with a 3.71 protective buy-stop provides an excellent and objective risk/reward play.

Corn Monthly

 

MAR WHEAT

While the wheat market has yet to even confirm a tiny bearish divergence in momentum, it's not hard to find technical reasons to believe that Mar Wheat is on a slippery slope around current and recent 4.27-to-4.38-area prices.  This slope will get more slippery if the market fails below Fri's 4.22 low and short-term risk parameter detailed in the hourly chart below.  Such sub-4.22 weakness will confirm at least the short-term trend as down and reject/define last week's 4.38 high as one of developing importance and a new short-term risk parameter from which non-bullish decisions can be objectively based and managed.

Wheat 60 min

 

Wheat Daily

Basis the Mar contract the daily log chart above shows waning upside momentum.  A failure below 4.22 will confirm this divergence "enough" to expose further weakness.  Contributing to a peak/reversal threat is the market's recent proximity to 14-Oct's 4.46 larger-degree corrective high and key risk parameter this market needs to break to, in fact, break the long-term downtrend.

Wheat Weekly

 

Wheat Weekly

On an active-continuation chart basis, the weekly log scale chart above shows only a 3-wave recovery from 31Aug16's 3.86 low THUS FAR that has stalled around the immediate area of the (4.34) 38.2% retrace of Jun-Aug's 5.24 - 3.86-component of the secular bear trend.  This chart and the monthly log chart below also show the market still below a ton of former support from the 4.50-to-4.65-range that's a huge resistant gateway to any major base/reversal count.

A relapse below late-Dec's 3.92 low remains required to confirm the 4-1/2-month recovery attempt as a 3-wave and thus corrective structure ahead of a resumption of the secular bear market.  But if there's a time and place for the market to start providing shorter-term proof of such a bearish count, we believe it is here and now.  Near-term weakness below 4.21 will reinforce this call, but the market will have to follow-up such weakness with sustained, impulsive, trendy behavior lower thereafter.

In sum, a cautious bullish policy remains advised with a failure below 4.21 required to threaten this call enough to warrant moving to a neutral-to-cautiously-bearish stance with strength above 4.38 then required to negate that call.  In effect we believe the market has identified 4.38 and 4.21 as the key directional triggers heading forward.

Wheat Monthly

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.