Corn Bottom Could Hinge Around $3.54

October 24, 2017 8:32AM CDT

In 16-Oct's Technical Blog's follow-up to 12-Oct's crop report-related volatility, we discussed that while the market's rejection of new lows below 31-Aug's 3.44 low was not unexpected, it was premature to conclude a bottom because the market had yet to recoup even 29-Sep's 3.58 smaller-degree corrective high and short-term risk parameter.  Now, as a result of Fri/yesterday's relapse to a 3.43 intra-day low (and Fri's new low close for the bear we'll discuss below), traders are advised to focus on 12-Oct's 3.54 high as arguably the tightest toggle point around which to start effectively moving towards a trend change.

To be clear, 06-Sep's 3.62 larger-degree corrective high and obvious upper boundary to the past seven weeks' range remains as THE key directional trigger to a base/reversal count that we believe could be major in scope.  What admittedly smaller-degree strength above 3.54 will provide is the end to the short-term downtrend from that early-Sep high and more objective risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed (although traders can use 3.42 as an objective micro risk parameter to such now).

Corn 60 min Chart

Corn Daily Chart

The slowdown in the rate of descent over the past seven weeks is clear in the daily charts above and below.  And especially with Fri's new low close below 30-Aug's previous low close of 3.45 amidst this waning downside momentum, it's not hard to speculate that the market may be near the very end of a 5-wave Elliott sequence down from 10-Jul's 4.15 high close.  But as always however, we require PROOF of "non-weakness" in the simple form of a recovery above recent corrective highs to, in absolute fact, break the downtrend(s).  A recovery above 12-Oct's 3.54 intra-day high and/or a close above 13-Oct's 3.53 will, in fact, break the intermediate-term downtrend and would be a prerequisite of a bullish divergence in daily or weekly momentum above the early-Sep high needed to break the long-term downtrend.  In lieu of such strength it would be premature to conclude the end of the bear from the Jul high.

Corn Daily Chart

Contributing to what we believe will be an outstanding and compelling base/reversal environment on a major scale is the still-crucial combination of the market's proximity (and rejection thus far) to the lower-quarter of the 3-YEAR range and support amidst what has been a return to historically bearish levels of market sentiment, typical of major base/reversal-threat environments.  If you are bearish corn (and you should be since the trend is still down), you have A LOT of company.  But that's OK, again, as long as the market sustains its downtrend.  The moment it doesn't- and we have to specific levels of various scales at 3.54 and 3.62 around which to make this judgement- the trifecta of trend reversal signals will be at hand:

  1. mo failure
  2. complete wave count
  3. historic (contrary opinion) sentiment that leaves the market vulnerable to a reversal.

These issues considered, a cautious bearish policy remains OK with a recovery above 3.54 providing the first evidence against this call and warranting a move to the sidelines by shorter-term traders.  Subsequent strength above 3.63 is required to break the major downtrend, reinforce a major base/reversal count and warrant a move to a new bullish policy by both short- and longer-term players.

Corn Weekly Chart

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.