RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Agricultural

Hog Pop First Approached as Corrective

Posted 04/11/2018 8:48AM CT | RJO Market Insights

While the past few days’ rebound is not unimpressive and certainly confirms the short-term trend as up following Mon’s poke above last Thur’s 74.25 initial counter-trend high, against the backdrop of 1Q18’s meltdown this rebound is advised to first be approached as a correction ahead of resumed losses rather than the start of a more significant reversal higher. The hourly chart below shows that this rebound did trickle above 28-Mar’s 76.92 high we advised as a short-term risk parameter to a bearish policy, but for reasons below traders are advised to require further gains above yesterday’s 77.00 intra-day high or a close above 28-Mar’s 76.62 corrective high close to threaten a continued bearish count enough to warrant its cover.

For scalpers, a cautious bullish punt from former 74.25-area resistance-turned-support is OK with a failure below Fri’s 72.35 low and micro risk parameter required to negate that call.
Lean Hogs Jun '18 60min Chart
Lean Hogs Jun '18 Daily Chart

The factors that reinforce a bearish count that contends this recent rebound is (4th-Wave) corrective include:

  • yesterday’s high coming within a few ticks of the (77.06) 50% retrace of a suspected 3rd-Wave decline from 83.87 to 70.25 in the daily chart above
  • Mon’s 75.77 high close falling a few ticks shy of a Fibonacci minimum 38.2% retrace of Feb-Apr’s suspected 3rd-Wave decline
  • this rebound falling well within the broader down-channel and easily within the bounds of such a mere correction
  • the 3-wave appearance (thus far) of the recovery from 04-Apr’s 70.25 low to yesterday’s 77.00 high as labeled in the hourly chart (top).

Lean Hogs Jun '18 Daily Chart
There’s no question that threats to the bear market are forming, including the developing potential for a bullish divergence in daily momentum (above) amidst a return to historically bearish levels of market sentiment shown in the weekly log close-only chart of the Jun contract below. Indeed, at a current 52% level our RJO Bullish Sentiment Index is at its lowest level in three years. But traders are reminded that sentiment is not an applicable technical tool in the absence of a confirmed bullish divergence in momentum of a scale sufficient to break the broader downtrend. And we believe herein lies the importance of requiring commensurately larger-degree strength above at least 77.00 and preferably a close above 76.62 needed to, in fact, break the major downtrend.

These issues considered, a bearish policy and exposure remain advised ahead of an expected resumption of the major bear trend to at least one more round of new lows below 70.25. An intra-day move above 77.00 or a close above 76.62 will suffice in threatening this call enough to warrant its cover and consideration of a move to the bull side.

Lean Hogs Jun '18 Weekly Chart

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.
For more information on RJO Market Insights, contact your broker or RJO representative.