RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

The extent and impulsiveness of today’s relapse renders this month’s recovery attempt from 31-Mar’s 4.29 low a 3-wave event as labeled in the hourly chart below.  Left unaltered by a recovery above Wed’s 4.50 high this 3-wave recovery is considered a corrective affair that warns of a resumption of Mar’s downtrend that preceded it.  Per such 4.50 is considered our new key risk parameter from which our preferred longer-term bearish policy can be objectively rebased and managed.

Wheat 60 min Chart

Wheat Daily Chart

We discussed in 03-Apr’s Technical Blog following that day’s bullish divergence in short-term momentum that any recovery attempt was likely a mere correction on a larger-degree scale.  Today’s relapse reinforces this call and exposes a (suspected 5th-Wave) resumption of the decline from 16-Feb’s 4.89 high shown in the daily log scale chart of the Jul contract above.  And from even a longer-term perspective the 3-wave nature of Dec-Feb’s recovery from 4.20 to 4.89 suggests that that recovery is also a correction that warns of an eventual resumption of 2016’s meltdown that preceded it.  In the end we believe today’s relapse exposes a run to new lows below at least 4.29 and probably 4.20 with minimum strength above 4.50 required to threaten this call and warrant defensive action.

Wheat Weekly Chart

Whether or not the secular bear trend will resume to new lows below last Aug’s 3.86 low on a weekly log active-continuation chart basis below remains to be seen.  What we can state with specificity however is that until or unless the market recovers above at least 4.50 lower and possibly sharply lower prices should not come as a surprise.  The past couple weeks’ 4.32-to-4.29-area support remains intact and an interim bounce from this area would not be unexpected, but ultimately we anticipate a break below this area and a run to and likely through 23Dec16’s 4.20 low.

These issues considered, a bearish policy remains advised with a recovery above 4.50 required to move to the sidelines.  In lieu of such 4.50+ strength we expected a run to new lows below at least 4.29 and likely 4.20.  The market’s downside potential below 4.20 is indeterminable and potentially steep.

Wheat Weekly Chart


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