S-T Bull Divergence Stems Bean Break, Resurrects Rebound Heading Into Crop Reports | RJO Futures

February 8, 2017 3:09PM CST

Today's definitive poke above the 10.42-area that has capped this market as resistance the past few days clearly break the recent slide from 18-Jan's 10.80 high.  The important by-product of this relative strength is the market's definition of last Fri's 10.26 low as the latest smaller-degree corrective low the market now needs to sustain gains above to maintain a more immediate bullish count.  A failure below 10.26 will render the recovery attempt from 30-Jan's 10.19 low a 3-wave and thus corrective affair that would re-expose late-Jan's decline and reinforce a much broader peak/reversal threat.  In this regard 10.26 is considered our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.  Former 10.42-area resistance is considered new near-term support.

Soybeans 60 min Chart

Soybeans Daily Chart

From a daily log scale perspective above, the major trend remains up with a failure below 06-Jan's 9.93 next larger-degree corrective low and key risk parameter still required to, in fact, break what has become a 5-MONTH rally.  Especially on the heels of today's strength that defines the 10.26 low and short-term risk parameter discussed above, the directional scales remain in favor of the bull.

On an even broader scale shown in the weekly log chart below, the market remains deep within the middle-half bowels of a 2-1/2-YEAR range where the odds of aimless whipsaw risk cannot be underestimated.  Herein lies additional importance of last Fri's admittedly tight but objective risk parameter at 10.26.

These issues considered, longer-term players remain advised to maintain a cautiously bullish stance with weakness below 10.26 required to pare this exposure to more conservative levels and subsequent weakness below 9.93 to jettison the position altogether.  Shorter-term traders with tighter risk profiles who were advised to step aside from bullish exposure in 24-Jan's Technical Blog following 23-Jan's momentum failure are advised to return to a cautious bullish stance from 10.45 OB with a failure below 10.26 required to negate this call.  We anticipate at least a steeper correction to the recent 10.80 - 10.19 decline and possibly a resumption of the 5-month rally to new highs above 10.80.  Hedge strategies for producer and end-users are shown below.

Soybeans Weekly Chart

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