Chi, Matif Wheat Rebounds Continue, Define New S-T Bull Risk Levels

September 22, 2017 9:09AM CDT


Yesterday's break above 14-Sep's 4.51 high reinforces at least an interim bullish count introduced in 01-Sep's Technical Blog after that day's bullish divergence in momentum above 4.38.  This continued recovery leaves Tue's 4.35-3/4 intra-day low in its wake as the latest smaller-degree corrective low the market is now required to sustain gains above to maintain a more immediate bullish count.  In this regard we are considered 4.35 as our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively rebased and managed.  Former 4.50-area resistance is considered new near-term support.

Wheat 60 min Chart

Wheat Daily Chart

From a longer-term perspective the past three weeks' recovery still falls well within the bounds of a correction within the major downtrend from early-Jul's highs shown in the daily log close-only chart above and weekly chart below of the Dec contract.  A ton of former support from the 4.55-to-4.60-area remains intact as a major resistance candidate.  A break above this area won't necessarily negate a broader bearish count, but at that point and given current historically low levels of bullish sentiment, a more extensive correction or reversal higher would have to be assumed.  In effect, we believe the market has identified 4.35 and 4.60 as the key directional triggers heading forward.

Wheat Weekly Chart


On an active-continuation chart basis, the weekly log scale chart below shows the market a good distance away from Aug'16's 3.86 low with a year's worth of price action below the market that cannot be ignored as significant basing behavior.  There's no question that 2016-17's recovery from 3.86 to 5.75 is a 3-wave, corrective affair that warns of a resumption of the secular bear to new lows below 3.86.  Basis the Dec contract above however, such a 5th-wave-down to new lows may have been satisfied, exposing a major BASE/reversal threat.  This disparity resulting from contract rolls endemic to the futures industry is acknowledged as a "gray area" relative to Elliott Wave "theory" and is one of the reasons why we take Elliott "theory" with a grain of salt.

These issues considered, a bullish policy and exposure remain advised for shorter-term traders with a failure below 4.35 required to negate this call, warrant its cover and re-expose the major bear.  Longer-term players remain advised to maintain a cautious bearish policy with a recovery above 4.60 required to not only neutralize all bearish exposure, but move to a cautious bullish stance ahead of further and possibly surprising gains as part of a major base/reversal threat.  In effect traders are advised to toggle directional biases and exposure around the 2-bit range of 4.35-to-4.60.

Wheat Weekly Chart



Similarly, yesterday's rally above this week's earlier 163.50-area resistance reaffirms our bullish count introduced in the 05-Sep's Technical Blog and leaves Tue's 161.25 low in its wake as the latest smaller-degree corrective low this market is now required to fail below to stem the rally, render the recovery from 29-Aug's 156.50 low a 3-wave and thus corrective affair and re-expose the major bear trend.  In lieu of such sub-161.25 levels AT LEAT the intermediate-term trend is up and further and possibly accelerated gains should not surprise.  Per such we are considering 161.00 as our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively rebased and managed.

Milling Wheat 60 min Chart


The hourly close-only chart below cleans out a lot of the intra-day noise of the past few weeks and clearly shows the 163.25-to-162.75-area as key former resistance that we would expect to hold as new support if something bigger to the bull side is developing.  This reinforces our 161.00 short-term risk parameter.


Milling Wheat 60 min Chart

Milling Wheat Daily Chart

From a long-term perspective the past few weeks' rebound remains dwarfed by Jul-Aug's plunge, suggesting that Sep's rebound cannot be ignored as "just" a bear market correction ahead of an eventual resumption of that bear to new lows below 156.50.  Commensurately larger-degree strength above the key 170.00-area former support-turned-resistance remains required to truly break Jul-Aug's downtrend and expose a major base/reversal threat.  But until or unless this market fails below at least 161.00, traders are advised to beware of exactly such a major base/reversal threat.

These issues considered, a bullish policy remains advised for shorter-term traders with a failure below 161.00 required to negate this call and re-expose the major bear.  Long-term players remain OK to maintain a cautious bearish stance, with a recovery above 170.00 required to jettison the position and flip around to a new bullish policy.

Milling Wheat Weekly Chart

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