Today’s slip below Thur’s 6.45 low detailed in the hourly chart below leaves Fri’s 6.77 high in its wake as the latest smaller-degree corrective high the market now needs to sustain losses below to maintain a more immediate bearish count. Its failure to do so will confirm a bullish divergence in short-term momentum and break at least the downtrend from 17-Jun’s 7.50 larger-degree corrective high and key long-term bear risk parameter. Per such, this 6.77 level serves as our new short-term risk parameters from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of non-bullish decisions like long-covers and bearish punts.
From a longer-term perspective and as discussed last week, Thur’s break below 01-Jun’s key 6.82 low confirms a bearish divergence in WEEKLY momentum. This mo failure is of a scale sufficient to threaten the secular bull trend. Historically frothy sentiment/contrary opinion levels and an arguably complete 5-wave Elliott sequence from Jul’21’s 4.63 low contribute to a major peak/reversal count and expose potentially steep, protracted losses straight away.
Given the magnitude of the secular bull trend however, as well as the fact that the past month’s sell-off attempt has yet to retrace even a Fibonacci minimum 38.2% of Jul’21 – May’22’s 4.63 – 7.66 rally thus far, it must be acknowledged that the current setback still falls well within the bounds of a prospective (4th-Wave) correction ahead of an eventual (5th-Wave) resumption of the secular bull to at least one more round of new highs above 16-May’s 7.66 high.
All this Elliott gibberish aside, the technical fact of the matter is that by virtue of last week’s break below 6.82, AT LEAST the intermediate-term, and arguably the long-term trend is now down. Per such a “count”, the decline from 17-Jun’s 7.50 is would be the dramatic 3rd-Wave of a major reversal lower and would be characterized by steep, sustained, accelerated losses straight away. In other words, the bear has created its opportunity to PERFORM and it must now BEHAVE LIKE ONE with increasingly obvious behavior to the downside. A short-term recovery above our short-term risk parameter at 6.77 will not necessarily negate such a count, but it would be the first minor dent to this argument. Commensurately larger-degree strength above 7.50 WILL, rendering the decline from 7.66 a 3-wave and thus corrective affair and re-expose the secular bull to new and perhaps steep highs above 7.66.
Indeed, we would remind traders of how the last major bull market from 2009 to 2012 ended, with a 2-month, $3.00, 5th-Wave resumption of the secular bull trend coming right out of the late-Jun crop report. After discussing the expected and even unexpected particulars of Thur’s crop reports with Randy Mittelstaedt this morning, it’s likely apparent to most that this specific crop report, in and of itself, is unlikely to produce a quick, violent recovery above our key 7.50 bear risk parameter. But it could easily defer or threaten a more immediate 3rd-Wave-down count with a recovery above 6.77 and back up into the lower-7.00-handle-area. Such an interim rebound would at least reject/define a more reliable low and support around which to then re-gauge the bear’s resolve. Thur’s report could also ignite further losses straight away that would reinforce the 3rd-Wave-down reversal count.
These issues considered, a bearish policy and exposure remain advised with a recovery above 6.77 deferring or threatening this count enough for shorter-term traders to move to the sidelines and perhaps even for longer-term players to pare bearish exposure to more conservative levels. Ultimately, commensurately larger-degree strength above 7.50 remains required to negate a peak/reversal count, re-expose the secular bull and warrant a return to at least a neutral, if not cautiously bullish stance by longer-term commercial players. As we continue to navigate this current peak/reversal threat, the key flexion points and battlegrounds have been well-defined and traders are advised to toggle directional biases and exposure around these levels commensurate with their personal risk profiles.