Technically Speaking

Grain Wave Counts Offer Clues

The weekly chart of the most active contract of soybeans above shows a strong move in both price and momentum, neither of which are showing signs of slowing or diverging on this time scale. If this is indeed wave one, the soybean move could still be in the very early stages. (DTN ProphetX Chart)

The December corn market is an interesting one to disect from both an intermediate and long-term perspective. It looks quite clear that the initial counter-trend rally from $3.63 3/4 to $4.54 was wave one as part of a larger degree five-wave bull move higher. However, after wave two concluded at $4.25 on June 6, the next leg of the rally to $4.73 was rather short in both time duration and price move. Usually, wave three is not the shortest wave out of waves one, three and five, which begs the question, if this is in fact a five-wave bull move or simply a three-wave corrective affair? If this move is in fact a three-wave corrective affair, then the highs at $4.73 would be expected to hold and additional weakness would be seen straightaway. Switching to an active-continuation chart, prices have pushed up against the July 2015 highs, but have failed to sustain strength above that level. If price is able to eventually push through that level, the old resistance from July 2015 would be expected to turn into new support. Risk parameters for gauging directional conviction moving forward exist at $4.73 and $4.49 with short-term microrisk to the upside at $4.64 1/4.

Soybeans also have a fairly straightforward wave count as well, although from a daily perspective, the current five-wave sequence looks like it has run its course. The initial counter-trend rally, which produced wave one, ended at $8.48 on May 18, which was followed by wave two, down to $8.17 on May 23. Wave three ran its course at $8.94 1/2 on June 4 followed by wave four, which ended at $8. 48 1/4 June 10. Wave five looks to have concluded at $9.21 1/2 on June 18, and has thusfar defended the wave three corrective highs. From a weekly perspective, the move looks to be in its infancy with the entire rally to $9.21 1/2, comprising wave one and plenty of green grass in front of the market. The other encouraging fact from a technical persective is momentum indicators are not slowing or showing any sign of divergence with price. Contrary to some "technical observors," a momentum indicator like stochastics producing a reading above 80 does not mean this market is overbought, but instead shows how strong this market is at the moment.

A true wave count for Chicago wheat is a bit stickier than those for corn and soybeans. Switching the chart to a daily close only chart, we can see the intial counter-trend rally stemming from the May lows at $4.24 to the corrective highs on June 3 at $5.19. This would be labled either wave one if part of a larger degree five-wave move, or simply the A-wave of an ABC corrective sequence. If the latter is true, then the rally at $5.39 on June 17 would have concluded the move and lower prices would be expected. However, as long as current prices hold the corrective highs from June 3 at $5.19, the door remains open that this is indeed a larger degree five-wave bull move, with new highs above $5.40 expected. Unfortunately, we can see the stochastic measure of momentum with a bearish diveregnce in momentum, although to be confirmed we would need to see price back below $5.19 and preferably even the $4.90 corrective low from June 5. As with soybeans, the weekly chart of the the active-continuation chart for Chicago wheat looks strong and more indicative of the first wave of a larger five-wave move as opposed to a corrective count, which has run its course.

Tregg Cronin can be reached at tmcronin31@gmail.com

Follow Tregg Cronin on Twitter @5thWave_tcronin

(BAS/BE)

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MIKE VARDAMAN
6/28/2019 | 7:32 AM CDT
Tregg I have been watching this move and agree with you