Posted on Sep 18, 2023, 09:43 by Dave Toth
Today’s clear break below the past month’s 4.74-area support reinstates and reaffirms the secular bear market in corn that is now down 43% from in 8.25 high in Apr’22 in the then-prompt Jul22 contract. This latest spate of weakness leaves Thur’s 4.85 high in its wake as the latest and absolute tightest corrective high this market is now minimally required to recoup to even defer, let alone threaten the major bear. Per such, this 4.85 level serves as our new mini parameter from which the risk of a still-advised bearish policy and exposure can be objectively rebased and managed by short-term traders with very tighter risk profiles.
Now-former 4.74-area support is considered key new short-term resistance we would expect to cap the market per our broader bearish count. This element reinforces the importance of even a very tight corrective high and mini risk parameter like 4.85.
On an intermediate-term basis and perhaps from the most practical standpoint, 29-Aug’s 5.00 corrective high remains intact as perhaps this market’s single most important technical level and THE level this market must recoup to break the portion of the bear trend from 24-Jul’s 5.72 larger-degree corrective high. Such 5.00+ strength remains required to confirm a bullish divergence in DAILY momentum and expose a more protracted correction or possible reversal higher. To truly threaten the 17-month secular bear market, commensurately larger-degree strength above 24-Jul’s 5.72 corrective high remains required. What this market has in store between 5.00 (if it ever gets there) and 5.72 is anyone’s guess, so even longer-term commercial players would be advised to pare or neutralize bearish exposure above 5.00.
The weekly log close-only chart of the Dec contract above and monthly log active-continuation chart below shows the magnitude of the secular bear trend and NO levels of any technical merit below the market following this morning’s clear break below the 4.74-area. None.
We’ve talked for months now about the decline from Oct’22’s 7.07 high and 61.8% retrace of Apr-Jul’22’s initial (SA- or 1st-Wave) decline being the C-Wave of a major correction or, more likely, the dramatic 3rd-Wave of a major reversal from last year’s high in a similar peak/reversal to that following 2011 – 2012’s massive peak/reversal process. We’ve also discussed the 4.81-area that makes the decline from 7.07 the same length (i.e. 1.000 progression) as Apr-Jul’22’s initial counter-trend break, a not uncommon Fibonacci relationship to navigate C-waves. But if it’s a 3rd-Wave of a new secular bear market, its 1.618 progression doesn’t cut across until the 3.80-area! THIS is the type of downside potential we believe must be considered for this market until/unless it arrests the clear and present and secular bear trend. Herein lies the importance of recent corrective highs and specific bear risk parameters like 5.72, 5.0 and even 4.85.
Now, understandably, market sentiment/contrary opinion levels have reached relatively historically bearish levels typical of major BASE/correction/recovery environments. However, traders are reminded that sentiment/contrary opinion is NOT an applicable technical tool in the absence of an accompanying confirmed bullish divergence in momentum needed to break the clear and present downtrend. Again, herein lies the importance of recent corrective highs and bear risk parameter.
These issues considered, a full and aggressive bearish policy and exposure remain advised with a recovery above 4.85 OK for very short-term traders to are or neutralize exposure and commensurately larger-degree strength above at least 5.00 for longer-term commercial players to follow suit. In lieu of such strength, further and possibly protracted losses remain anticipated.