For quite a number of weeks now and while acknowledging the continued secular bull trend, we’ve warned that waning upside momentum amidst stratospheric but understandable sentiment levels from the extreme upper recesses of this market’s historical range are conditions typical of a major peak/reversal threat. This market has yet to come close to confirming a bearish divergence in momentum of a scale sufficient to confirm the break of the major bull trend. But every larger-degree momentum failure begins with a smaller-degree divergence, and this is what we believe this market is on the verge of, especially given the developing backdrop of a major peak/reversal process in Nov beans we discussed in yesterday’s Technical Blog.
In 01-Mar’s Soybean Meal Technical Blog, we identified that day’s 465.8 low as the latest smaller-degree corrective low this market is minimally required to fail below to even threaten the major bull trend, let alone break it. Peer such and still, this level remains intact as our short-term bull risk parameter. However, the hourly chart below shows the past week’s relapse and the market’s gross failure to sustain last week’s breakout above the prior MONTH’S resistance-turned-support around the 488-to-485-area. As a result, we are defining 07-Mar’s 496.7 Globex day-session high as one of developing importance and a mini but key parameter from which the risk of non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed. 496.7 is THE level this market needs to recoup to mitigate a peak/reversal threat and reinstate the secular bull. Until and unless such strength is resurrected, and especially if this current slide continues and breaks 01-Mar’s 465.8 low, it would not be premature to suggest last week’s high could prove to be the END of the secular bull market. Of course, for scale purposes, it would be absurd to CONCLUDE a major top from just miniscule weakness thus far. But we believe this situation warrants heightened attention with focus now on the next key thresholds below the market at 465.8 and 23-Jan’s 452.8 larger-degree corrective low.
On an appropriately larger-degree basis given that last week’s 498.0 high was a new contract high for the secular bull market in the May contract, the daily log chart above shows the pertinence of 01-Mar’s 465.8 corrective low the market needs to break to confirm a bearish divergence in daily momentum and break the uptrend from at least 23-Jan’s 441.4 large-degree corrective low. Further still, commensurately larger-degree weakness below 23-Jan’s 441.4 larger-degree corrective low remains required to, in fact, break the uptrend from sat least 06Oct22’s 391.90 low and threaten the nearly-three-year secular bull. But it’s easy to see upside momentum that’s been waning since early-Jan in the weekly log active-continuation chart below. Amidst understandable but egregious sentiment/contrary opinion levels, it is hard to ignore the developing prospect for a peak/reversal environment that we believe would be nothing short of mammoth in scope.
Again, we cannot and will not conclude a major peak/reversal count from proof of only very short-term weakness thus far. But until this market can recover above last week’s 496.7 Globex day-session high, both short- and long-term commercial traders are urged to ramp up their awareness for just such a topping process that could be as monumental as that that followed 2012’s 541 all-time high.
Finally, the monthly log active-continuation chart below shows the market’s proximity to the extreme upper recesses of this market’s massive but lateral historical range. If there is a time and place to beware a major top, it is here and now, with 01-Mar’s 465.8 and 23-Jan’s 441.4 lows the next key downside thresholds, the failures below which will reinforce and then confirm such a major top.
These issues considered and despite the fact that this market has yet to fail below 465.8, shorter-term traders with tighter risk profiles are advised to move to at least a neutral, if not cautiously bearish policy with a recovery above 496.7 required to negate this call and warrant its cover. Longer-term commercial players remain OK to maintain a bullish policy and exposure but are advised to pare exposure to more conservative levels on a failure below 465.8 and jettison all remaining exposure on commensurately larger-degree weakness below 441.4. All traders also have the option of acknowledging and accepting whipsaw risk above 496.7 in exchange for deeper nominal risk below 465.8 and/or 441.4.