Posted on Apr 06, 2023, 12:15 by Dave Toth

With May corn seemingly resigned to the middle-half bowels of the past year’s range for the last month of its life and with the roll to Jul as the prompt contract another week or so away, we’re rolling our technical focus to the Jul contract.  And on a shorter-term basis, the hourly chart of the Jul contract below shows the past couple days’ slip below 31-Mar’s 6.25 corrective low we noted in that day’s Technical Webcast as our new mini risk parameter this market needed to sustain gains above to maintain a more immediate bullish count.  Its failure to do so confirms a bearish divergence in short-term momentum that defines Mon’s 6.46 high as one of developing importance and our new mini parameter from which non-bullish decisions like long-covers and bearish punts can be objectively based and managed by very short-term traders with tighter risk profiles.

This chart also shows this week’s relapse “only” retracing to mid-Mar’s 6.19-atrea resistance-turned-support, thus far.  But for longer-term reasons we’ll address below, traders are urged to beware this 6.19-area, the clear break below which will raise the odds that the recovery from 13-Mar’s 5.98 low is a 3-wave and thus corrective affair that would warn of a resumption of a major, multi-quarter peak/reversal threat.  To confirm the second-half of mar’s recovery as a 3-wave correction, the market needs to break 22-Mar’s 6.05 larger-degree corrective low.  In order for an alternate bullish count and exposure to remain viable, this market needs to stay above 6.05.  In effect, we believe this market has identified 6.05 and 6.46 as the key short-term flexion points around which directional biases and exposure can be objectively toggled.

From a longer-term perspective, Mar’s intra-10-month-range rebound shown in the daily log chart above is not unimpressive.  But as a result of this week’s bearish divergence in admittedly short-term momentum, the market has thus far rejected the attempt to revert to the middle of this massive range and remains below a preponderance of the past six months’ price action and resistance.  Until and unless this market can recover above at least 6.46, and against the backdrop of a still-arguable 6-month downtrend, it’s far from inconceivable that Mar’s recovery attempt is another 3-wave correction within a still-developing and major bear trend.

To truly nullify such a long-term bear market and confirm Oct-Mar’s entire 7.06-to-5.97-decline a 3-wave and thus (bull market) correction, the Jul contract needs to recover above at least 30-Dec’s 6.78 larger-degree corrective high and key long-term bear risk parameter.  To raise the odds of such a more protracted show of strength, the bull can start by recouping Mon’s 6.46 high.

What we also find very interesting about this week’s bearish divergence in short-term momentum is that it stems from Mon’s high close of 6.36-1/4.  This resistance level is the precise 6.36-1/4 low close and former support from 06-Dec detailed in the daily close-only chart below; the market has thus far acknowledged this former support as new key resistance.  Combined with this level being the exact 50% retrace of Feb-Mar’s 6.70 – 6.02-portion of the bear, it’s not hard to see this week’s high as the prospective end or upper boundary of a correction within the longer-term downtrend.  If correct, a resumption of this trend to new lows below 5.97 would/should be forthcoming.  To threaten this count, again, the market needs to recoup at least this week’s 6.46 intra-day high and/or close above 6.37.

Lastly and from a very long-term perspective shown in the monthly log active-continuation chart below, we remind traders that the same long-term peak/reversal elements that warned of and accompanied 2012’s all-time high and massive peak/reversal remain intact from last summer’s 8.25 high.   To even defer this long-term bearish prospect, the market needs to recoup at least 30-Dec’s 6.78 high and preferably last Oct’s 7.07 high in the prompt contract. 

These issues considered, a bearish policy and exposure remain advised for long-term commercial players with a recovery above 6.46 required to defer or threaten this call enough to warrant paring exposure to more conservative levels.  Shorter-term traders with tighter risk profiles are advised to move to a neutral-to-cautiously-bearish stance with a recovery above 6.46 required to negate this call and warrant its cover.  A clear break below the 6.19-area support will reinforce this count while a subsequent break below 6.05 will confirm it and expose a break of early-Mar’s pivotal 5.97-area.

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