Beans, Meal Succumb (again) to Incessant Range

December 11, 2017 8:33AM CST

JAN SOYBEANS: On the heels of Wed's mo failure below our 9.96 short-term risk parameter discussed in 05-Dec's Technical Blog, overnight prices below 30-Nov's 9.85 next larger-degree corrective low and our longer-term risk parameter not only negates any more immediate bullish count, but indicates the market's reversion to an incessant lateral range that has dominated this market for the past two years. The bull had the chance to "perform" last week when it took out both the Nov and Oct highs, but failed miserably to do so, reinforcing the broader, lateral, aimless range.

As a result of this relapse the market has obviously identified 05-Dec's 10.15 high as one of developing importance, the end of the rally from at least 14-Nov's 9.67 and our new key risk parameter the market has to recoup to reinstate what we still believe is a major base/reversal environment. Thur's 9.95 smaller-degree corrective high serves as a short-term risk parameter that, if recouped, will confirm a bullish divergence in short-term momentum (although within middle-half bowels of this incessant range this would mean virtually nothing).
The daily chart above shows the market's current position in the middle of the middle-half of the past couple months' range that's also deep within the middle-half of 2017's range on a weekly log basis below that's also deep within the middle-half bowels of the past THREE YEARS' range. This has been and remains a trend-followers worst nightmare full of aimless whipsaw risk and higher odds of losing trading decisions that still requires a more conservative approach to risk assumption.

For very long-term reasons cited many times since Oct'16 and reiterated again following late-Jun'17's bullish divergence in momentum, we believe the next $1.00+ move will be HIGHER, not lower. But as a result of the past few days' relapse, further lateral-to-lower prices have been exposed for a run at 14-Nov's 9.67 low or lower.

These issues considered, all previously recommended bullish policy and exposure have been nullified and a neutral/sideline position is advised for the time being. An intra-range hiccup to the 10.00-area OB could provide a favorable risk/reward selling opportunity with a recovery above 10.15 negating this call and resurrecting a broader bull. "Chasing" bearish exposure lower within this rangey environment is not advised.

JAN SOYBEAN MEAL: The technical construct and expectations for meal are virtually identical to that detailed above for beans with the added kicker that our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC last week hit a historically high, frothy level of 86%, its highest level since that that warned of and accompanied Jan's key high shown in the weekly log chart below. The market's rejection of both the extreme upper recesses of this year's range and the (347.1) 1.000 progression of Aug-Oct's 296 - 332-rally from 14-Nov's 311 low also contributes to another intra-range peak/reversal environment.


In addition to 06-Dec's obvious 347.3 high and new key risk parameter the hourly chart below shows last Wed afternoon's 342.8 high as a smaller-degree corrective high and short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed. Although here too, within the confines of such an incessantly lateral range that is already rife with aimless whipsaw risk, we're not sure "shorter-term" risk parameters offer the protection we expect of it.

These issues considered, all previously advised bullish policy and exposure have been nullified ahead of expected lateral-to-lower prices for the foreseeable future. A return to the lower-quarter of this year's 350-to-296-range cannot be ruled out, but the current middle-half of this range makes for a poor risk/reward condition from which to initiate an interim bearish policy and exposure based on this call. Rather, traders are advised to wait for an intra-range pop to, say, the 337-to-343-range for a preferred risk/reward selling opp with protective buy-stops above 347.3.


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