Posted on Jun 05, 2023, 12:05 by Dave Toth
We introduced the prospect for an interim corrective rebound in 23-May’s Technical Webcast following that day’s bullish divergence in very short-term momentum. But against the backdrop of the secular bear trend shown in the weekly log chart of the Dec contract below, commensurately larger-degree strength above 29-Mar’s 5.76 larger-degree corrective high remains required to break even the portion of the major downtrend from last Oct’s 6.37 high. Per such, this 5.76 level remains intact as our key long-term bear risk parameter pertinent to longer-term commercial players.
We wanted to start this analysis out with a very long-term chart to now only show the magnitude of the major bear trend, but also to show the past couple weeks’ rebound relative to this major bear and this rebound’s engagement of a key area that held this market as support from last summer, including Mar-Apr this year, until late-Apr’s breakdown below this area that relegated it as a new key resistance area. If this current rebound is, in fact, another correction within the major bear trend, this 5.40-to-5.50-area is a specific one to watch for a recovery-stemming bearish divergence in momentum, the confirmation of which will reject/define a more reliable high and resistance from which an acute and favorable risk/reward re-selling opportunity may be presented.
Drilling down a bit to a daily scale, the bar chart above shows specific former support-turned-resistance from mid-Mar around the 5.47-to-5.51-area, with a little added Fibonacci gravy at 5.52, the 50% retrace of the suspected 3rd-Wave decline from 30-Dec’s 6.14 high to 19-May’s 4.91 low. On a close-only basis, the 38.2% retrace of the late-Dec/mid-May suspected 3rd-Wave cuts across at 5.43. Fri’s close was 5.41.
While Fri’s recovery above 05-May’s 5.37 corrective high confirms a bullish divergence in daily momentum, the SCALE of this divergence only allows us to conclude 18-May’s 4.91 low as the end of the portion of the major bear trend from 29-Mar’s 5.76 corrective high, nothing more, nothing less. Given the backdrop of the major bear trend and the fact that this market has yet to recoup even an area of former support-turned-resistance, like the 5.43-to-5.50-area, let alone a larger-degree corrective high like 5.76, the current recovery is advised to first be approached as a corrective (and favorable) risk/reward selling/hedging opportunity for longer-term commercial players ahead of this Fri’s crop report.
If our preferred count is correct and the past couple weeks’ recovery is indeed another mere correction, traders are urged to keep a keen eye on momentum, where a countering bearish divergence around the 5.40-to-5.50-area may reject/define the end of upper boundary of another correction ahead of an eventual resumption of the secular bear trend to new lows below 4.91.
From a short-term, intra-day perspective detailed in the hourly chart below, Fri’s continued recovery above 26-May’s 5.36 high certainly reaffirms the short-to-intermediate-term UPtrend. The important takeaway from Fri’s continued strength is the market’s definition of Fri’s 5.23 low as the latest smaller-degree corrective low the market would now be expected to sustain gains above to maintain a more immediate bullish count. Its failure to do so will confirm a countering bearish divergence in short-term momentum, arrest the rebound and expose at least a corrective relapse if not a resumption of the secular bear trend. For shorter-term traders who have been whipsawed out of bearish exposure by the past couple weeks’ recovery, a relapse below 5.23 will provide a favorable and objective risk/reward opportunity to re-establish a bearish policy and exposure as whatever high is rejected/defined by such a failure will serve as our new short-term bear risk parameter.
These issues considered, a bearish policy and exposure remain advised for longer-term commercial players with a clear break above the 5.52-area needed to pare exposure to more conservative levels and commensurately larger-degree strength above 5.76 to neutralize remaining exposure. Shorter-term traders have been advised to move to a neutral/sideline position to circumvent the heights unknown of a suspected interim correction within the still-arguable major bear trend. Resuming a bearish policy and exposure are advised on a failure below 5.23.
