RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Today’s clear break below 05-Jun’s 169.50 low in the now-prompt Dec contract confirms Jun-Jul’s recovery attempt as a 3-wave and thus corrective structure within the resumed secular bear market in this contract.  28-Jul’s 176.00 high is the latest corrective high that the bear must now sustain losses below to maintain a more immediate bearish count.  In this regard 176.00 becomes our new key risk parameter from which a resumed bearish policy and and exposure can be objectively based and managed.  And to break the secular bear trend the market must now recoup 05-Jul’s 189.00 major corrective high and key long-term risk parameter.

Milling Wheat Daily Chart

By breaking the early-Jun low the market has nullified the bullish divergence in momentum that threatened the secular bear and identified 07-Jul’s 185.50 high weekly close and exact 50% retrace of Jun’15 – May-17’s 201.25 – 170.00 decline as THE major resistant cap and long-term risk parameter this market now needs to recoup to break the secular bear market.  This is an impractically high risk parameter for most traders so 28-Jul’s 176.00 corrective high serves as an admittedly tighter but nonetheless key parameter around which the risk of a resumed bearish policy can be objectively managed.

It may prove interesting to note that the 166.50 level marks both the 0.618 progression of Jul’s initial 189.00 – 173.50 decline from 28-Jul’s 176.00 corrective high on a daily basis above AND the 0.618 progression of Jun’15 – May’17’s 210.25 – 170.00 decline from 07-Jul’s 185.50 corrective high on a weekly close-only basis below.  However, traders are warned that such merely derived technical levels as Bollinger Bands, trend lines, the ever-useless moving averages and even the vaunted Fibonacci relationships we cite often in our analysis have NEVER proven to be reliable and objective reasons to buck a trend and expect support in the absence of a confirmed bullish (in this case) divergence in momentum.  And they never will.  We use such areas to be more watchful for the requisite momentum failure that, if confirmed, combines to form a better base/reversal-threat condition.  In lieu of such a mo failure such derived levels should be approached with a grain of salt.

Milling Wheat Weekly Chart

While the trend is down on ALL SCALES in the Dec contract and should not surprise by its continuance or acceleration, from an active-continuation chart basis shown in the monthly log scale chart below the picture may not be so bleak as the market remains within an arguable 16-month BASE/reversal-threat condition.  After rejecting the lower-quarter of the historical and lateral 10-YEAR range, it would be premature to conclude the current relapse isn’t part of a BULL market correction.  A failure below Apr’s 162.25 low in the now-prompt Dec contract is needed to, in fact, break the uptrend from Apr’16’s 149.00 low and render the exact 38.2% retrace of the 2012-16 decline from 279.25 to 149.00 as a 3-wave and thus corrective affair that could then re-expose the secular bear from 2012’s high to new lows below 149.00.

If a resumption of the 5-year secular bear is in the cards, then the market should now be able to easily sustain recent losses below at least last Fri’s 176.00 corrective high and key risk parameter.  If, alternatively, the past month’s sharp, impulsive break is the COMPLETING 5th-Wave in the Dec contract from Jun’15’s high, a recovery above 176.00 will provide the first evidence of such a base/reversal count and a unique risk/reward buying opportunity.

These issues considered, a bearish policy is once again advised with recovery attempts to the 170.00-area former support-turned-resistance first approached as corrective selling opportunities.  A recovery above 176.00 is required to not only negate this call but resurrect a base/reversal count that could be major in scope.  In lieu of such 176.00+ strength further and possibly accelerated losses should not surprise.

Milling Wheat Monthly Chart


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