Matif Wheat Looks to Join U.S. Ags in Major Base/Reversal Count

February 20, 2018 8:35AM CST

MAR MILLING WHEAT
Today's break above 30-Jan's 161.00 initial counter-trend high confirms a bullish divergence in momentum that defines 17-Jan's 154.00 low as the end of at least the downtrend from 03-Oct's 173.00 high and possibly the end of the major decline from Jul'17's 191.75 high. The hourly chart below shows that this continued strength has left corrective lows in its wake at 158.50 and 156.00 that can now be used as micro- and short-term parameters from which all non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.
wheat_mar18_60min_chart
wheat_mar18_daily_chart
While the market still remains below a ton of price action from the second-half of 2017 that shows former 161-to-165-range support as a key new resistance candidate on both a daily (above) and weekly close-only (below) basis, today's rally, in fact, breaks AT LEAST the textbook 5-wave Elliott sequence down from 03-Oct's 173.00 high. However, the Fibonacci fact that the decline from that 173.00 high spanned a length within a tick of its 61.8% progression of Jul-Ag's preceding 191.75 - 161.50 decline cannot be ignored as a contributing factor to a larger-degree base/reversal-threat environment, especially given base/reversal confirmations in Chi wheat, corn, beans AND meal.
wheat_mar18_weekly_chart

wheat_weekly_chart


Further contributing to a base/reversal environment that we believe could be major in scope are the following facts:

  • clearly waning downside momentum on a weekly log active-continuation chart basis above
  • the market's proximity to and rejection thus far of the lower-quarter of the past three years' range
  • the Fibonacci fact that the decline from Jul'17's 189.00 high spanned a length exactly 1.618-time that of Jun0Jul'16's preceding 178.25 - 1.57.00 decline
    • reinforcing a wave count that contends 17-Jan's 154.00 low completed a major B- or 2nd-Wave correction that began from Jun'16's 178.25 high (not Jul'17's 189.00 high, which would be considered the B-Wave "irregular" within the broader correction)
  • the market's proximity to and continued rejection of the (149.50-area) lower-quarter of the historic 11-YEAR range shown in the monthly log active-continuation chart below.

To be sure, the weight of quarters if not years of falling prices remains arguably intact, with the past month's recovery attempt thus far even shallower than Aug-Oct'17's correction before the bear resumed. BUT IF this recovery is just another bear market correction, the market has been accommodative in identifying recent corrective lows at 156.00 and even 158.50 that the bear must relapse below to threaten a bullish count and reinforce a bearish one. Until and unless such weakness is shown, the technical factors listed above that warn of a major base/reversal threat cannot be ignored.

Per such and unless you're of a very long-term risk profile who acknowledges 03-Oct's 173.00 larger-degree corrective high as a long-term bear risk parameters, we have advised traders to neutralize all previously recommended bearish exposure on today's recovery above 161.00 and further advise them to establish a new but cautious bullish policy from current 161.50 OB with a failure below 158.50 sufficient to cover this exposure if you're a scalper and commensurately larger-degree weakness below 156.00 required to render the recovery from 154.00 a 3-wave and thus corrective affair that might then re-expose the secular bear and negate this bullish call and policy. In lieu of such weakness further and possibly accelerated gains are expected straight away.

wheat_monthly_chart

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