December corn continues to be locked inside its declining trend channel stemming from the July/August highs. With last week's firmer trade, however, prices look poised to challenge the top end of the trend channel near $3.60, which would also be the 38.2% retracement of the $3.88 1/2 to $3.43 sell-off. Bolstering bullish ideas firmer is the fact on-balance-volume (OBV) diverged from price on the latest move lower and has also pushed into positive territory. This is a sign that bulls have moved into control the last three weeks. Add in that the stochastic measure of momentum is showing a clear divergence from price off the August lows and now the September lows. To confirm the bullish divergence in momentum, price would need to retake the Sept. 4 through 11 corrective highs and consolidation trade above $3.69. The 50-day moving average is currently residing near $3.70 to $3.71, a big indicator for managed and programmed funds. This would also reinforce the idea the July-September sell-off was a complete five-wave bearish sequence as part of a larger degree three-wave corrective sequence from the May highs. December corn needs to reclaim the August lows, which is first-tier resistance and then move through $3.60 and the $3.70 August highs to give bulls more confidence.
In similar fashion to corn, November soybeans have some bullish-looking technical factors this week. The lows made on Sept. 18 near $8.12 were just 4 cents away from the 138.2% Fibonacci progression of the $9.22 to $8.51 sell-off stemming from the $9.07 highs. This argues the entire move lower from the $9.22 highs was a three-wave corrective affair, which is now complete, and warning of new highs above $9.07 and even $9.22. Adding to this sentiment of a bottom being in, is the fact that momentum is also flashing a bullish divergence from price, dating to the Aug. 31 lows. Bulls are in charge based on OBV with positive numbers confirmed this week. The 50-day moving average is just overhead at $8.63 and would be the first logical resistance test. Looking back a bit further, and on an active-continuation basis, if price has in fact put in lows at $8.12, it would set up rather nicely to argue the entire move down from the $10.82 March high as a complete five-wave sequence. This would mean the downtrend is over and either consolidative or higher trade awaits, but confidence lows would be high. Reclaiming and holding the $8.50 September highs as we mount an assault at the $9.00 to $9.22 highs is crucial.
In keeping with the other two grain markets, December Chicago wheat is also trying to put forth its own case the downtrend is complete and higher prices are expected straightaway. Like soybeans and corn, Chicago wheat put in its own potential bullish divergence in momentum, stemming all the way back from the August lows. To confirm this, trade would be needed back above the $5.32 3/4 highs from Sept. 11. Also similar to corn and soybeans, OBV is trending higher and is now sitting at the highest level since Aug. 10. To wit, wheat looks the best it has since the middle of August from a technical perspective. Several tests of the strength of this market will be coming in soon with the 50/100/200-day moving averages overhead between $5.25 to $5.41. The 200-day is up first at $5.25.
Tregg Cronin can be reached at email@example.com
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