S-T Mo Failure Stems Wheat Run, Exposes VulnerabilityPosted 12/04/2019 7:56AM CT |
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.