RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

It’s been nearly two weeks since the market rejected the upper recesses of Mar-Apr’s range with a bearish divergence in short-term mo discussed in 12-Apr’s Technical Blog. As a result of today’s smart recovery above 18-Apr’s 3.92 corrective high in the now-prompt Jul contract, the hourly chart below shows that the market has confirmed a countering bullish divergence in short-term mo that defines Mon’s 3.85 low as the END of the slide from 09-Apr’s 4.01 high. Per such we can use this 3.85 low as our new short-term risk parameter from which non-bearish decisions like short-covers can be objectively based and managed.

The problem however is that the market remains deep within the bowels of Mar-Apr’s 4.03 – 3.77-range that could still produce aimless whipsaw risk for weeks ahead. The good news, we believe, is that the longer the market does “something other” than break down below 23-Mar’s 3.77 range base and key long-term risk parameter, the greater the odds become that all this sideways chop is corrective/consolidative ahead of the eventual resumption of Nov-Mar’s uptrend that preceded it.

Corn Jul '18 60min Chart

Corn Jul '18 Daily Chart

Trying to “count” stuff (waves or anything else) within a lateral range like that that has unfolded from 13-Mar’s high is typically futile. We’ve noted a couple counts in the daily charts above and below, but traders are advised to take these with a grain of salt. What’s more important to acknowledge is the lateral, labored MANNER in which this market has tried to sell off since early-Mar’s peak. On the heels of an obvious impulsive trend from the Jan low to that Mar high, this lateral price action is advised to first be approached as a corrective/consolidative event that warns of an eventual resumption of Jan-Mar’s clear uptrend.

This acknowledgement works fine for longer-term players who can simply throw protective sell-stops below 28-Mar’s 3.82 low close and/or 23-Mar’s 3.77 low that this market is required to break to threaten a long-term bullish count and warrant its cover. For shorter-term traders with tighter risk profiles that require a much tighter risk parameter, corrective lows and shorter-term risk parameters like Mon’s 3.85 low come into play. But even that low present a poor risk/reward proposition from the current upper-third of the range in question ahead of what still could be a lot of intra-range chop and whipsaw. Per such shorter-term traders are advised to current keep powder dry on the sidelines.

Per a broader bullish count however, it is cool to note that 23-Mar’s 3.77-1/2 spasm low was just a 1/4-cent from the 61.8% retrace of Jan-Mar’s 3.62 – 4.03 rally while 28-Mar’s 3.82 low close was the exact 50% retrace of that same rally. It would seem that these Fibonacci facts would reinforce our contention that Mar-Apr’s 3-wave-looking sell-off attempt thus far is a correction ahead of an eventual resumption of Jan-Mar’s rally to new highs above 4.00.
Corn Jul '18 Daily Chart
Corn Weekly Chart
Against this bull-market-correction backdrop, we would remind traders of what we still believe is a major, multi-year BASE/reversal environment that arguably dates from Oct 2014’s 3.18 low shown in the monthly log chart below. We’ve discussed the technical factors on which such a bullish call is predicated many times since Oct’16’s bullish divergence in weekly momentum identified 31Aug16’s 3.15 low as THE END of the secular bear trend from 2012’s 8.49 all-time high and start of a new major correction or reversal higher. This count calls for prices above Jul’17’s 4.17 high- and possibly well above that high- before the market fails below Nov’s 3.36 low.

Might the expected breakout above 13-Mar’s 4.03 high be THAT rally that accelerates to 4.50 or 4.75 or 5.00??? There’s no way to tell. But the better question is, “Do you wanna bet that such a 4.03+ breakout ISN’T that rally?” Objectively placed and preferred risk/reward bets PRIOR to such a breakout and closer to identified bull risk parameters like 3.77 and even 3.85 is what we’re trying to discern and implement following admittedly shorter-term mo failures like today’s above 3.92.

These issues considered, a bullish policy remains advised for long-term players with a failure below 3.77 required to negate this specific call and warrant its cover. Because of the market’s current position near the upper-third of the 2-month range however where the risk/reward merits of a bullish punt are poor, shorter-term traders are advised to maintain a neutral/sideline position, keeping powder dry for another intra-range dip with a preferred risk/reward setup.

Corn Monthly Chart

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