RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Agricultural

S-T Mo Failure Stems Wheat Run, Exposes Vulnerability

Posted 12/04/2019 7:56AM CT | RJO Market Insights

Yesterday’s relapse below 27-Nov’s 5.26 smaller-degree corrective low and short-term risk parameter updated in Fri’s Technical Blog confirms a bearish divergence in momentum that defines Fri’s 5.46 high as the END of a textbook 5-wave Elliott sequence up from 18-Nov’s 5.02 low.  Per such, this 5.46 high is considered our new short-term and key risk parameter from which non-bullish decisions like long-covers and cautious bearish punts (following a corrective recovery rebuttal) may be objectively based and managed.

From a longer-term perspective, commensurately larger-degree weakness below 18-Nov’s 5.02 larger-degree corrective low and long-term risk parameter remains required to, in fact, break the nearly 3-month uptrend from 03-Sep’s 4.70 low.  HOWEVER, late-Nov’s poke into not only the upper-quarter of the past five months’ range, but also the upper-quarter of the past THREE YEAR range warn of a slippery slope “up here” for bulls.  Indeed, as the risk of maintaining a bullish policy into this clear and present intermediate-term downtrend is to that 5.02 low (or roughly 25-cents), the upside pay-off would have to assume this setback is a correction and that the bull will resume to not only 5.47+ levels, but upwards of the 5.75-area to define even a 2:1 risk/reward ratio.  This doesn’t seem like a favorable or preferred risk/reward proposition.

Rather, we advise acting on the premise that 29-Nov’s 5.46 high is a more significant high ahead of a more protracted correction or reversal lower, exchanging whipsaw risk above 5.46 for deeper nominal risk to 5.02.  We strongly suspect that we’ll see a (B- or 2nd-Wave) corrective rebuttal of the past couple days’ swoon.  If this rebound unfolds in a 3-wave and thus corrective manner as we suspect, a favorable risk/reward selling opportunity will be presented.

These issues considered, a neutral/sideline policy is advised for the time being.  We will be watchful for proof of labored, corrective, 3-wave behavior on a recovery attempt in the days or perhaps even hours ahead for a favorable risk/reward selling opportunity and update traders accordingly.

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.