Beans & Meal: If It Looks Like a Correction and Smells Like a Correction.... | RJO Futures

May 11, 2017 10:15AM CDT


If you look up the phrase "technical correction" in Webster’s, a picture of the hourly chart of Jul meal should appear alongside its definition:  A labored, frustratingly choppy, lateral PITA that fails miserably to sustain any sort of trendy momentum whatsoever.

As a direct result of yesterday's break/spasm above the prior 3-1/2-WEEKS' 321-to-322.5-range resistance, the market has, in fact, identified Mon's 312.7 low as THE corrective low and risk parameter it now must fail below to confirm the broader recovery attempt from 11-Apr's 309.60 low a 3-wave and this corrective affair consistent with a still-developing broader bear trend.  This said, we believe the:

  • market's gross failure to sustain 321+ prices
  • exact (325.6) 1.000 progression of mid-Apr's initial 309.6 - 322.5-rally from Mon's 312.7 low

clearly define yesterday's 325.7 high as one of developing importance and an objective risk parameter from which an y non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.

Soybean Meal 60 min Chart


Soybean Meal Daily Chart

Against the backdrop of Feb-Apr's 357 - 309 plunge shown in the daily log scale chart above, the market's failure to retrace even a Fibonacci minimum 38.2% keeps the past month's recovery attempt well within the bounds of a correction hath warns of an eventual resumption of the downtrend that preceded it.

Market sentiment has eroded to neutral-to-pessimistic levels that we ultimately believe will warn of and accompany a major base/reversal environment and outstanding risk/reward BUYING opportunity.  But in light of the bear market correction count discussed above, such a buying opportunity could easily come after a sharp, emotional, headline-driven plunge to the (sub-295) lower-quarter of the past couple years' range on a weekly log active-continuation basis below.

These issues considered and while acknowledging the importance of Mon's 312.7 low and support, a bearish policy and exposure remain advised with a recovery above 325.7 required to not only negate this call, but expose/resurrect a BASE/reversal environment that may shock to the upside.  In lieu of such 325.7+ strength we anticipate a resumption of Feb-Apr's downtrend and even Jun-Sep'13's downtrend to new lows below at least 309 and quite possibly below 295.

Soybean Meal Weekly Chart




Yesterday's spike above last Fri's 9.83 high nullified Mon's bearish divergence in momentum and left Mon's 9.63 low in its wake as the smaller-degree corrective low and short-term risk parameter the market now needs to fail below to break the uptrend from at least 28-Apr's 9.52 low and possibly the past month's uptrend from 9.41.  Only a glance at the hourly chart below is needed to see that the market is on the verge of such a sub-9.63 failure that would expose the recovery attempt from 9.41 as a 3-wave and thus corrective affair that would then re-expose the broader bear trend.

Soybeans 60 min Chart


As with meal, the extent of the past MONTH'S recovery falls well within the bounds of a mere bear market correction against the backdrop of Jan-Apr's broader plunge.  A short-term failure below our short-term risk parameter at 9.63 will raise the odds of such a bearish count while subsequent weakness below 28-Apr's larger-degree corrective low and key risk parameter at 9.52 will confirm it and expose potentially sharp losses thereafter.

These issues considered, traders are advised to move to a cautiously bearish policy on the immediate break below 9.63 with subsequent strength above 9.89 required to negate that call.

 Soybeans Daily Chart




Soybeans 60 min Chart


The technical construct and expectations for the Nov contract are identical to those detailed in Jul above with Mon's 9.58 low and 28-Apr's 9.49 low the key toggle points and risk parameters the market needs to break to raise the odds of and then confirm a broader bearish count.  For those looking to get a leg up on such a count, yesterday's 9.80 high serves as an objective risk parameter from which to do so.

Soybeans Daily Chart


Soybeans Weekly Chart

The weekly log chart of the Nov contract above and weekly log active-continuation chart below show the historically bearish sentiment levels that we believe will ultimately warn of and accompany a major BASE/reversal environment.  But until these markets recovery above at least yesterday's highs, another and possibly a final collapse to sub-9.25 levels (lower-quarter of 2-1/2-year range) is expected.

Soybeans Weekly Chart

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