RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Agricultural

Matif Wheat Resumes Bear, Identifies New Risk Levels

Posted 04/23/2019 7:47AM CT | RJO Market Insights

MAY MATIF WHEAT

Milling Wheat May '19 60 Min Chart

 

While the May contract has yet to break 11-Mar’s 181.00 low, the extent and impulsiveness of the past week’s relapse and new lows in the Sep contract reinforce our bearish count discussed in 10-Apr’s Technical Blog that contends that Mar’s recovery from 181.00 to 191.00 is part or all of a mere corrective/consolidative structure that warns of a resumption of Dec-Mar’s collapse that preceded it.  26-Mar’s 191.00 high obviously stands out as one of developing importance and serves as our new long-term risk parameter to a bearish policy.  The Fibonacci fact that Mar’s recovery attempt stalled at the exact (191.40) 38.2% retrace of Dec-Mar’s 209.50 – 181.00 decline would seem to reinforce a count calling this recovery the 4th-Wave of an eventual 5-wave sequence down from 02Aug18’s 220.50 high.

If that 5th-Wave began with 26-Mar’s 191.00 high, 01-Apr’s 184.75 low would be the smaller-degree 1st-Wave down of the larger-degree 5th-Wave, and a level subsequent corrective recovery attempts should not be able to recoup in order to maintain the impulsive integrity of a more immediate bearish count.  A recovery above 185.00 will not allow us to conclude the end of a bearish count, but rather just a reversion to the past month’s 181 – 191 consolidative range ahead of an eventual resumption of the broader downtrend.  Per such, shorter-term traders with tighter risk profiles are advised to use 185.00 as their new short-term risk parameter from which to objectively rebase and manage a still-advised bearish policy.

Milling Wheat May '19 Daily Chart

 

SEP MATIF WHEAT

Milling Wheat Sep '19 60 Min Chart

 

The technical construct and expectations for the soon-to-be-prompt Sep contract are virtually identical to those detailed above in the May contract with the only difference being that the Sep contract has resumed it’s major downtrend with today’s break of its 12-mar low at 173.00 shown in the daily log chart below.  01-Apr’s 176.00 low and 26-Mar’s 180.25 high are considered our new short- and longer-term risk parameters from which a still-advised bearish policy can be objectively rebased and managed.

 

Milling Wheat Sep '19 Daily Chart

 

Milling Wheat Weekly Chart

The weekly (above) and monthly (below) log scale active-continuation charts put the 9-month downtrend into perspective to previous historical prices.  Clearly, the market is still in the correction or reversal of 2018’s entire 154.00 – 219.25 rally, an exact 61.8% retrace of 2012 – 2016’s major downtrend from 279.25 to 149.00.  What kind of downside potential remains is anyone’s guess and should not be underestimated.  We’ve marked some longer-term Fibonacci retracement and progression relationships at 176 and 173, but in the absence of an accompanying CONFIRMED bullish divergence in momentum that requires a recovery above a prior corrective high of a scale sufficient to break the major downtrend, these merely “derived” technical levels are no more or less relevant than any other derived level like Bollinger Bands, imokus, channel lines and even the worthless moving averages.  Such derived levels NEVER have proven to be a reliable reason to define support and buck a trend and they never will in absence of a confirmed bullish (in this case) mo divergence.

In sum, a bearish policy remains advised with recoveries above at least 185.00 in the May contract and above 176.00 in the Sep contract to even defer, let alone threaten this count and warrant defensive steps.  In lieu of such strength, further and possibly accelerated losses remain anticipated to levels indeterminately lower.

Milling Wheat Monthly Chart

RJO Market Insights