Toggle Directional Corn Bias Around This $0.17-Cent Range | RJO Futures

February 24, 2017 8:49AM CST

Yesterday's break below Tue's 3.73 initial counter-trend low confirms at least the intermediate-term trend as down and leaves Wed's 3.80 high in its wake as the latest smaller-degree corrective high this market now needs to sustain losses below to maintain a more immediate bearish count.  In  this regard 3.80 becomes our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively base and manage non-bullish decisions like long-covers and cautious bearish punts.

Corn 60 min Chart


Corn Daily Chart

From a longer-term perspective however shown in the daily (above) and weekly (below) log scale charts of the May contract, the trend remains UP with a failure below 30-Jan's 3.63larger-degree corrective low still required to break this clear and present uptrend.  In this regard 3.63 remains as our key long-term risk parameter.  In effect the market has identified 3.80 and 3.63 as its key directional triggers heading forward.

Could 16-Feb's 3.87 high be the END of a major bear market correction?  Sure.  The nearly 6-MONTH recovery from 31Aug16's 3.32 low is clearly just a 3-wave affair thus far.  And last week's 3.87 high is just 2-cents removed from the (3.89) 50% retracement of Jun-Aug'16's 4.55 - 3.32 meltdown.  Furthermore, the historically bearish market sentiment that helped us navigate a major base/reversal environment last Sep/Oct has recovered to a neutral-to-benign condition that won't inhibit a bigger contract move either way.  HOWEVER...

The simple fact of the longer-term technical matter is that the market has yet to break the broader uptrend.  PROOF of weakness below 3.63 is required for this.  Until and unless such sub-3.63 weakness is proven, the past week's sell-off attempt is advised to first be approached as a corrective buying opportunity for longer-term players.

Corn Weekly Chart

Corn Weekly Chart

From an even longer-term perspective shown in the monthly log scale chart of the most active futures contract below, we continue to believe that last Aug's 3.15 low ENDED the secular bear market from Aug'12's 8.49 all-time high and that the price action from Oct'14's 3.18 low is a major BASE/reversal PROCESS similar to that that stemmed from Dec'08's 3.05 low circled in blue below.  This PROCESS however could easily still include another relatively extensive corrective retest of that 3.15 low.  A failure below our 3.63 risk parameter discussed above would likely expose such a more extensive retest OR a resumption of the secular bear to new lows below 3.15.  To negate our major base/reversal count that may not come to fruition until 3Q17, all the bear has to do is break 3.15.

These issues considered, shorter-term traders with tighter risk profiles are advised to move to a neutral-to-cautiously-bearish stance from 3.75 OB with a recovery above 3.80 negating this call and re-exposing the 6-month bull.  Longer-term players remain advised to maintain a bullish policy and exposure with a failure below 3.63 required to negate this call and expose a broader correction or reversal lower.  We will be watchful for a bullish divergence in short-term mo from the area around the current (3.72) 61.8% retrace of Feb's 3.63 - 3.87-rally that would stem the current relapse and present a favorable risk/reward buying opportunity for shorter-term traders.

Corn Monthly Chart

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.