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Corn Reaffirms Bearish Count, Defines New Key Risk Level

Posted 08/12/2019 11:59AM CT | RJO Market Insights

DEC CORN

Today’s break below 01-Aug’s 3.97 low reaffirms our bearish count introduced in 29-Jul’s Technical Blog two weeks ago and leaves Fri’s 4.25 high in its wake as, we believe, this market’s single most important technical level.  This 4.25 high serves as the latest key corrective high the market would fully be expected to sustain losses below to maintain a more immediate bearish count.  Its failure to do so would not only confirm a bullish divergence in momentum that would arguably break the near-two-month broader downtrend from 17-Jun’s 4.73 high, but could also render that slide a 3-wave and thus corrective affair consistent with our very long-term base/reversal count that dates from Aug’16’s 3.15 low.

In this regard Fri’s 4.25 high serves as our new key risk parameter from which a still-advised bearish policy and all bearish spec and hedge exposure can be objectively rebased and managed.  By the same token, this 4.25 threshold is currently the level end-users need to see this market above to resurrect concern over bull hedges.

Both the hourly chart above and daily chart below show the market’s respect for former 4.20-to-4.24-area support-turned-resistance that reinforces this area as a key threshold and toggle point going forward.  The 2-month downtrend has resumed and the daily log chart below show NO levels of any technical merit shy of 13-May’s 3.64 low to hold it up as prospective support.

On a much broader scale however, long-term traders are reminded that May-Jun’s impressive spike higher and the current relapse from 17-Jun’s 4.73 high- indeed ALL of the price action from Aug’16’s 3.15 low- remains as an arguably subset of a major, multi-year BASE/reversal environment virtually identical to that that followed Sep’1998’s 1.96 low and the major, multi-year base/reversal environment that followed.  We’ve thoroughly discussed the prospect that May-Jun’s shocker after 14-May’s bullish divergence in momentum is identical to the summer 2002, 1Q04 and summer ’05 spikes that led to subsequent and extensive but corrective relapses within the base/reversal process, ALL of which proved to be long-term BUYING OPPORTUNITIES for longer-term players.

For the time being however the (we believe interim) bear trend has ben reinforced and continues to warrant a bearish policy and exposure with a recovery above 4.25 required to threaten this call enough to warrant its immediate cover.  In lieu of such 4.25+ strength, further and possibly extended losses remain expected straight away.

SEP ETHANOL

Today’s clear and sharp continuation of the past couple months’ slide reaffirms our bearish count introduced in 01-Jul’s Technical Blog and leaves smaller- and larger-degree corrective highs in its wake at 1.442 and 1.516, respectively, that now serve as our new short- and long-term risk parameters from which a still-advised bearish policy and exposure can be objectively rebased and managed.  The market’s downside potential within the past four years’ range shown in the weekly log close-only chart below is indeterminable, but we will watch with increasing attention to any sell-off-stemming bullish divergence in momentum from the lower-quarter of this range (1.336 or low) for what could prove to be an outstanding risk/reward buying opportunity for long-term players.  In lieu of at least 1.442+ strength anytime soon however, further lateral-to-lower prices remain expected.

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
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