Mo Failure from Range Base Tilts Wheat Directional Scale Higher

September 26, 2018 8:05AM CDT

The market's recovery Mon above 12-Sep's 5.29 corrective high and our short-term risk parameter discussed in 14-Sep's Technical Blog confirms a bullish divergence in momentum that defines 13-Sep's 4.95 low as one of developing importance and our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.  The prospect that the decline from 02-Aug's 6.13 high to that 4.95 low is a complete 50-wave Elliott sequence as labeled in the hourly chart below contributes to this base/reversal count.

Wheat Dec '18 60 Min Chart

Wheat Dec '18 Daily Chart

The daily chart above shows the confirmed bullish divergence in momentum from the extreme lower recesses of the past seven months' range while the weekly log scale chart of the Nov contract below shows the market's rejection- once again- of the lower-quarter (5.02-to-4.68) of its contract range dating back to summer 2016.  Within the context of what we maintain is a major, multi-year BASE/reversal process, this market's repeated rejection of the lower-quarter of its historical range continues to argue against any broader bearish count and reinforces a broader base/reversal count.

The fact that our RJO Bullish Sentiment Index has returned to neutral/indifferent/confused levels while the Bullish Consensus ( has eroded to relatively low/bearish levels is not inconsistent with a broader bullish count.  To threaten this broader base/reversal count, all the market needs to do is break and sustain trendy, impulsive behavior below a previous key low like 11-Jul's 4.90 low.

Wheat Dec '18 Weekly Chart

Finally, on a weekly active-continuation chart basis, the market has yet to provide the evidence necessary to threaten what's arguably a 2-YEAR secular uptrend from Aug'16's 3.87 low.  Against this backdrop the admittedly surprisingly extensive Aug-Sep relapse may be presenting bargain-basement prices for bulls ahead of a resumption of this bull to eventual 5.93+ levels.  Indeed, Aug-Sep's setback is akin to May-Jul and Feb-Mar's preceding corrective setbacks that ultimately gave way to the bull.  To truly threaten a long-term bullish count, a failure below 11-Jul's 4.71 commensurately large-degree corrective low and long-term risk parameter is required.

These issues considered, traders have been advised to move to a neutral/sideline position as a result of Mon's bullish divergence in mo and are subsequently advised to first approach the past couple days' rebuttal to last week's pop as a (B- or 2nd-Wave) corrective buying opportunity (around 5.08 OB) with a failure below 4.95 negating this call and warranting its cover.  Subsequent strength above Mon's 5.31 high will reinforce this count and expose potentially accelerating gains thereafter that would warrant increased bullish participation.

Wheat Weekly Chart

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