S-T Mo Failure Renders Sep Milling Wheat Rebound Corrective, Re-Exposes Bear | RJO Futures

April 25, 2017 8:31AM CDT

The market's failure Fri below 18-Apr's 169.50 initial counter-trend low in the now-prompt Sep contract confirms a bearish divergence in momentum that defines 13-Apr's 171.75 high as the END of the recovery attempt from 27-Mar's 165.25 low.  This recovery attempt looks to be a 3-wave affair as labeled in the hourly chart below.  Left unaltered by a recovery above 171.75, this 3-wave recovery is considered another correction consistent with the secular bear trend to eventual new lows below 165.25.  Per such 171.75 is considered our new key risk parameter to a still-advised bearish policy.

This hourly chart also shows yesterday's continuation of Fr's failure that leaves yesterday's 169.00 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to even defer, let alone threaten a broader bearish count.  In this regard 169.00 is considered our new short-term risk parameter from which a bearish policy can be objectively rebased and managed by shorter-term traders with tighter risk profiles.  This tight but objective risk parameter may come in handy given the market's proximity to the extreme lower recesses of the past month's range where another recovery spasm cannot be ruled out while 27-Mar's 165.25 low and support remains intact.

Wheat 60 min Chart

Wheat Daily Chart

The extent and impulsiveness of Mar's plunge obviously renders that entire mass of choppy, frustrating, whipsaw price action from 08Sep16's 168.75 low to 02-Mar's 175.25 high a corrective/consolidative event within a still-unfolding secular bear market.  13-Apr's 171.75 high and that 02-Mar high at 175.25 are the obvious key highs and risk parameters this market has got to recoup to threaten and then negate the secular bear.  In lieu of such proof of strength recovery attempts shy of at least 171.75 are advised to first be approached as corrective selling opportunities by longer-term players.

On a weekly close-only basis below, the resumption of the major bear market from Jun'16's 182.75 high is arguably unfolding as a 5th-Wave diagonal triangle (falling-wedge) as the RATE of decline has certainly been slowing for many months that often times is a precursor to a major bottom.  Until and unless this market recovers above at least 171.75 however, the long-term trend is considered down and should not surprise by its continuance or acceleration.

Wheat Weekly Chart

Wheat Monthly Chart

From an even longer-term perspective shown in the monthly log active-continuation chart above, the market's failure to sustain last year's losses below Sep'14's 153.25 low and proximity to the lower-quarter of a 10-YEAR range between 300 and 118 cannot be ignored as contributing factors to a major BASE/reversal-threat environment.  Unfortunately, market sentiment figures don't exist for European markets, but from a long-term, secular bear market perspective, we'd be surprised if the market sentiment for Matif wheat isn't similar to that shown in the monthly overlay chart below for Chicago wheat which would also be a contributing factor to a BASE/reversal threat environment.  This said, traders are reminded that sentiment is not an applicable technical tool in the absence of a confirmed bullish divergence in momentum of a scale sufficient to threaten the major bear.  herein lies the importance of identifying larger-degree corrective highs and risk parameters like 171.75 and certainly 02-Mar's 175.25 high.

These issues considered and while acknowledging the prospect for some interim corrective bounces while 27-Mar's 165.25 low and range base remains intact, a bearish policy remains advised with strength above at least 169.00 and preferably 171.75 required to pare or neutralize bearish exposure.  IN lieu of such strength we anticipate a break to new lows below 165.25 ahead of further and possibly accelerated losses thereafter.  The market's downside potential below 165.25 is indeterminable but last Oct's 157.00-area support and certainly Apr'16's 149.00 low in then front-month contracts will serves as support candidates.

Wheat Monthly Chart

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