RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

The extent and 5-wave-looking impulsiveness of the past week’s recovery above 13-Mar’s 8.72 corrective high and our short-tern risk parameter discussed in 16-Mar’s Technical Blog defines last Mon’s 8.21 low as one of obvious importance and, for additional reasons we’ll discuss below, our new long-term risk parameter from which even long-term players are advised to base non-bearish decisions like short-covers and new bullish punts.

On a shorter-term basis detailed in the hourly chart below, today’s continuation of the past week’s rebound leaves a Fri morning low in its wake at 8.53 that we believe constitutes this market’s latest smaller-degree corrective low and minimum level the market now needs to fail below to jeopardize the impulsive integrity of a more immediate bullish count.  In this regard this 8.53 level serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively base non-bearish decisions like short-covers and cautious bullish punts.  Because until and unless this market fails below at least 8.53, there’s no way to determine the scope of this initial counter-trend rally.  And if the explosive price action in meal is any indication, sharply higher prices in beans straight away cannot be ruled out.

On a broader scale, 04-Mar’s 9.11 high remains intact as a level this market arguably still needs to recoup to confirm Jan-Mar’s entire 9.74 – 8.21 decline as the 3-wave and thus corrective affair we believe it to be.  Indeed, former 8.80-area support, since demolished a couple weeks ago, serves as a new resistance candidate.  Additionally, the past week’s rebound has thus far “only” retraced 38.2% of Jan-Mar’s decline, so we can’t ignore an alternate count that would suggest the past week’s spasm is just a correction.

HOWEVER, the:

  • extent and 5-wave-looking impulsiveness of the past week’s rally discussed above
  • market’s recent proximity to the extreme lower recesses of the past year’s range and
  • LOWEST BULLISH CONSENSUS SINCE OCT 2001

warn of a base/reversal threat that could be major in scope that we believe warrants a shift to a new bullish policy until and unless the bear negates this call with, quite simply, proof of further weakness below 8.21.

Finally, and as we’ve discussed for quarters, we believe that on  very long-term scale shown in the monthly log scale chart below, and similar to that that we maintain is still unfolding in the corn market, the market has yet to provide the evidence to negate the prospect that the past FOUR YEARS’ price action from Nov’15’s 8.44 low is any different than the major base/reversal process that followed Jul 1999’s 4.05 low.  On this basis and given the technical facts listed above, “down here” at sub-8.60 levels, we believe soybean prices offer an extraordinary risk/reward buying opportunity for long-term commercial players, especially now that the market has rejected/defined a more reliable low at 8.21 from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

The near-term challenge will be navigating the prospective (B- or 2nd-Wave) corrective rebuttal to the past week’s initial (suspected A- or 1st-Wave) rally.  In 05-Mar’s Technical Blog discussing meal’s initial counter-trend rally, we discussed this same prospect and discipline that saw nearly two weeks of a choppy, corrective and extensive (i.e. >61.8% retrace) relapse before giving way to last week’s explosive rally.  We’re being a little presumptuous by suggesting today’s 8.79 high might have completed this initial counter-trend move.  As a reference point for instance, even a 50% retrace of the past week’s rally projects down to the 8.50-area.

While the market’s immediate upside potential is unknown and could still be extreme, traders are advised to wait for a preferred risk/reward buying opportunity following a suspected and more extensive corrective rebuttal.  In the meantime, all previously advised bearish policy has been threatened enough to be considered negated, warranting a more bullish policy that advises to first approach setback attempts to the 8.50-area or lower as corrective buying opportunities with a failure below 8.21 required to negate this call and reinstate the major bear.  In lieu of such sub-8.21 weakness, we believe a major base/reversal process dating from May’19’s 7.91 low just stemmed its latest corrective relapse attempt and is poised for a significant move higher.

RJO Market Insights

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