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Soybean Slide Intact Below This Pivotal 17-Cent Range

Posted 09/09/2019 8:12AM CT | RJO Market Insights

While the market hasn’t broken 28-Aug’s 8.52 low yet, the hourly chart below shows that Thur/Fri’s relapse below last Tue’s 8.59 minor corrective low confirms a bearish divergence in very short-term momentum that defines Wed’s 8.80 high as one of developing importance and the end to what looks to be only a 3-wave recovery from 28-Aug’s 8.52 low.  Left unaltered by a recovery above 8.80, this 3-wave recovery is considered a corrective/consolidative affair that warns of a resumption of the downtrend that preceded it.  And per such this 8.80 level serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a still-advised bearish policy.

This tight but objective risk parameter will come in handy given some of the longer-term BASE/reversal-threat factors we’ll discuss below that are made even more critical with Thur’s key crop reports.

Only a glance at the daily chart is needed to acknowledge the key trend as down.  No question.  And while we’ve identified last Wed’s 8.80 high as a shorter-term risk parameter to a bearish count, commensurately larger-degree strength above 13-Aug’s 8.97 next larger-degree corrective high remains required to, in fact, not only break the 3-month downtrend, but render it a 3-wave and thus corrective structure that would then warn of a resumption of May-Jun’s uptrend that preceded it.  Per such this 8.97 high serves as our key long-term risk parameter to a bearish count.

IF IF IF this market has something broader to the bear side in store, we believe this 8.80-to-8.97-range is absolutely pivotal to a continued bearish count.  IF IF IF May-Jun’s rally was part of a broader BEAR MARKET correctio and the past quarter’s relapse is a resumption of the secular bear market to new lows below 7.91, then the bear would be fully expected to BEHAVE LIKE ONE and sustain trendy, impulsive, even accelerated price action down.  It’s failure to do so will not only mitigate any broader bearish count, but reinforce our long-term VBASE/REVERSAL count calling the past quarter’s relapse a (B- or 2nd-Wave) correction of May-Jun’s initial counter-trend rally that would warn of a resumption of that rally to eventual new highs above 9.48.

We will gauge this debate precisely around the 8.80-to-8.97-range.  A recovery above 8.97 will provide clear technical reason for end-users to establish bull hedges and for producers to neutralize bear hedges.  Interim, smaller-degree strength above 8.80 will provide an early indication of this bas/reversal count.

Longer-term base/reversal-threat factors include:

  • May-Jun’s bullish divergence in MONTHLY momentum that identifies May’s 7.91 low in the then-prompt Jul contract as THE level this market needs to break to negate this count
  • trendy, impulsive 5-wave behavior on that (suspected initial) counter-trend rally
  • historically bearish sentiment levels that haven’t been seen since 2001, and
  • the fact that the 7-year bear from 2012’s 17.89 all-time high has spanned virtually an identical length (56%) to all four previous major declines over the past 20 years (shown in the monthly log chart below).

It’s also easy to see the similarity of the past four years’ slowdown/base/reversal-threat process to that that stemmed from July 1999’s 4.05 low that ultimately led to summer 2002’s major reversal higher.

IF the next big move in beans is to the upside per this long-term, multi-year base/reversal count, then the market would be expected to stem this clear and present downtrend with a bullish divergence in mo somewhere between 8.50 and 7.91.  And we will gauge that divergence initially above 8.80 and then subsequently and completely above 8.97.  Until such strength is shown, further and possibly accelerated losses should not surprise.

These issues considered, a bearish policy remains advised with a recovery above 8.80 required for shorter-term traders to move to a neutral/sideline position and for longer-term players to pare exposure to more conservative levels.  Subsequent strength above 8.97 will warrant all remaining bearish exposure to be immediately neutralized in favor of at least cautious bullish exposure ahead of what would be considered a major reversal higher above that key 8.97 toggle point.  We will discuss a key bull-hedge strategy “down here” for end-users over the next couple days ahead of Thur’s pivotal crop reports.

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