RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

JUL SOYBEANS

Yesterday and today’s relapse below 03-Jun’s 15.43 low and our micro risk parameter discussed in Mon’s Technical Blog not only confirms a bearish divergence in short-term momentum, it leaves Mon’s 16.11 high in its wake as the end of what looks to be a 3-wave recovery from 26-May’s pivotal 14.89 low as labeled in the hourly chart below.  Left unaltered by a recovery above 16.11, this 3-wave recovery attempt is considered a corrective/consolidative event that satisfies the key third of our three reversal requirements we’ve been squawking about since 19-May’s bearish divergence in daily momentum (1st requirement) and subsequent proof of 5-wave impulsive behavior down to 26-May’s 14.89 low (2nd requirement).  Combined with waning upside momentum virtually all year and historically frothy bullish sentiment, we believe the Jul contract is poised for a major correction/reversal lower.

Per such, Mon’s 16.11 high is considered the B- or 2nd-wave of a major correction or reversal lower and our new short-term risk parameter from which traders can base and manage the risk of a newly advised bearish policy and exposure while 12-May’s 16.68 high is considered the end of at least the rally from 31-Mar’s 13.55 low and possibly then secular bull trend from Apr’20’s 8.18 low and our new key long-term risk parameter from which commercial players can objectively base and manage non-bullish decisions like long-covers and new bearish exposure.

Further proof of weakness below 26-May’s 14.89 low remains required to confirm this major peak/correction/reversal count and expose potentially steep losses thereafter.  The prospect that 12-May’s 16.68 high completed a major 5-wave Elliott sequence from last year’s 8.18 low is labeled in the weekly log active-continuation chart below that also shows waning upside momentum all year amidst historically frothy sentiment/contrary opinion levels that haven’t been seen since 2012’s infamous peak and reversal.

These technical facts and observations are enough to at least question the risk/reward merits of maintaining a bullish policy and, we believe, enough to warrant a new bearish policy and exposure until this market can recoup at least 16.11.  In sum, traders are advised to neutralize bearish exposure and move to a new cautious/hedged bearish policy and exposure at-the-market (15.15) with a recovery 16.11 required to threaten this call enough to warrant its cover.  In lieu of such 16.11+ strength, further and possibly accelerated losses straight away should not surprise.

NOV SOYBEANS

Conversely, since the Nov contract established a new high for its secular bull trend this past Mon, it has yet to satisfy even the first of our three reversal requirements, with a failure below 03-Jun’s 13.97 corrective low and short-term risk parameter required to break the uptrend from even 26-May’s 13.25 low, let alone threaten the secular bull.  Per such, this 13.97 level serves as our new short-term risk parameter from which traders can objectively rebase and manage the risk of still-advised bullish policy and exposure ahead of a continuation of the secular bull trend.

The daily log scale chart below shows the obviousness of 26-May’s 13.25 larger-degree corrective low this market remains required to fail below to confirm a bearish divergence in momentum of a scale sufficient to break the major bull.  In this regard, this 13.25 level remains intact as our key long-term bull risk parameter.  A short-term failure below 13.97 may raise the odds of an eventual larger-degree failure below 13.25, but we can only cross that bridge if/when the market takes us there.

These issues considered, a bullish policy and exposure remain advised with a failure below 13.97 required for shorter-term traders to move to the sidelines and for longer-term players to pare exposure to more conservative levels.  In lieu of such weakness, this week’s setback attempt should not surprise by being only another corrective hiccup within the still-arguable secular bull for new crop.

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