S-T Mo Failure, Return to Bearish Sentiment Tilt Corn Techs Higher | RJO Futures

April 3, 2017 1:02PM CDT


In 21-Mar's Technical Blog we identified 20-Mar's 3.70 corrective high as the short-term risk parameter the market needed to sustain losses below to maintain a more immediate bearish count and an assault on Aug'16's low.  The market's recovery this morning above this threshold leaves 27-Mar's 3.54 low in its wake as the END of a 5-wave Elliott sequence down from 28-Feb's 3.86 high as labeled in the hourly chart below and possibly the end of a 3-wave structure down from 16-Feb's 3.86 high.  Left unaltered by a relapse below 3.54, this 3-wave sell-off attempt cannot be ignored as a CORRECTIVE structure that warns of a resumption of Aug'16 - Feb'17's 3.32 - 3.87 rally that preceded it.  In this regard 3.54 serves as our new and critical short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objective based and managed.

Corn 60 min Chart

Corn Daily Chart

To be sure, the market remains within an aimless, directionally-challenged, "ranges-within-ranges" condition that makes forecasting the next "move" difficult.  The weekly log active-continuation chart below shows the market smack in the middle of the past 2-1/2-YEARS' range.  It WAS our opinion that the combination of:

  • 09-Mar's bearish divergence in momentum
  • the market's rejection of the exact (3.87) 61.8% retrace of last year's 4.39 - 3.15 decline and
  • Aug-Feb's 3-wave recovery attempt labeled in the daily chart above

warned of a resumption of last year's collapse and an assault on and possible break of 31Aug16's 3.32 low.  While a recovery above 16-Feb's 3.87 high and key risk parameter remains required to mitigate this bearish count, the combination of:

  • the extent of the market's rejection of the 7-month range-center and
  • return to historically bearish levels of market sentiment shown in the weekly log chart below

tilts the directional scales higher and defines 27-Mar's 3.54 low as one of developing importance and our new short-term risk parameter from which non-bearish decisions like short-covers, cautious bullish punts and end-user bull hedges can be objectively based and managed.  In effect the market has identified 3.87 and 3.54 as the key directional triggers heading forward.

Corn Weekly Chart

Corn Daily Chart



Similarly, the Dec contract's failure to sustain recent losses below 20-Mar's 3.93 corrective high and short-term risk parameter clearly breaks the sell-off attempt from 16-Feb's 4.04 high and defines 27-Mar's 3.78 low as one of developing importance and our new short-term risk parameter from which non-bearish decisions like short-covers, cautious bullish punts and bull-hedges can be objectively based and managed.  The fact that Mar's sell-off attempt retraced exactly 61.8% of Aug-Mar's 3.67 - 3.99 rally on a weekly close-only basis below would seem to reinforce last week's low as an important one from which we cannot ignore the possibility of a resumption of Aug-Feb's rally that preceded it.  And again, the erosion in market sentiment levels to 36% in our RJO Bullish Sentiment Index and 29% in the Bullish Consensus (marketvane.net) warns of a vulnerability to higher prices now that the market has, in fact, broken Feb-Mar's slide with this morning's recovery above 3.93.

To resurrect a broader bearish count all the market has to do is break last week's 3.78 low and short-term risk parameter.  Until or unless such weakness is proven, approaching setback attempts to the 3.86-area OB as corrective buying opportunities is both an objective and favorable risk/reward decision.

Corn Weekly Chart

Corn Monthly Chart

We would once again remind long-term traders of what we still believe is a major, multi-year BASE/reversal environment that arguably dates from Oct'14's 3.18 low.  We have made the comparison to 2008-09's base/reversal detailed in the weekly log chart above and 1998-2000's base/reversal shown in the quarterly log chart below.  The market could easily remain trapped within the past couple years' 4.50-to-3.15-range for quarters or even years ahead.  But given that we believe the next MAJOR move in corn is UP, we never want to underestimate the prospective longer-term importance of even a smaller-degree low like last week's 3.54 low in the May contract and 3.78 low in the Dec.

These issues considered, the May contract's current position in the middle of its past month's 3.87 - 3.54-range and the Dec contract's similar position in the middle of its respective 4.04 - 3.78-range presents a poor risk/reward condition from which to initiate directional exposure.  Per such, we advise being watchful for bearish divergences in short-term momentum from these ranges' upper quarters for a favorable risk/reward scalp from the bearish side and, conversely, bullish divergence in short-term mo from their lower quarters for a favorable risk/reward buying opportunity.  Until either of these conditions is met, a neutral/sideline position is advised.

Corn Quarterly Chart


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