Riding The Wave
Beans balked-and-filled in a wave of bearishness
about the weather, closing two more windows (gaps or laps) left last week on
July 10 and 11. While this formation also left a potentially bearish
“island top reversal” formation, a closer look at the chart — and
faith in Elliot Wave Theory — suggests that the pullback might be a healthy
remand that defines even greater highs.Â
One of the cardinal rules among Elliot Wave practioners
is that the third wave (or swing) is the largest (up wave) of the five-wave
series. Since the April 24 low in August beans
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daily charts to interpret the July 17 high as being wave one or wave five,
suggesting, by process of elimination, that 538 is the wave three high.
This implies another major leg up — wave five — in beans.
Beans
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above support at the 38.2% retracement of their April-July run. Notice this market
is also in a Pullback From Highs setup that could consolidate at these levels as
its 20-day moving average catches up.Â
Take note that this morning’s Pre-Opening
Futures Outlook pointed out the “short-term weather still looks
bearish” and that although “the outlook for a bumper crop is probably
still out of the question, improving crop conditions are possible over the next
week which should push end-user buyers to the sidelines.” Such information
is for “day consumption” in the weather-driven market, and not indicative
of longer-term outcomes in grains, but important for getting a daily feel.Â
Soybean oil
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Pullback From Highs pattern for next week.
In a potential changing of the guard on the Momentum-5
List, the decline in grains made way for today’s rash of
New 10-Day Highs List contracts to potentially assert themselves:
Japanese yen
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euro FX futures
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have all demonstrated nascent signs of momentum, although the sell offs in each
today to mild-to-flat gains is a concern (the yen did the best of this group
but, like beans in reverse, the JYU1 was capped by the 38.2% retracement of its
June-July decline).
Importantly, as they may be decoupling slightly from their
normally lock-step correlation with the
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are the Momentum-5
List leader. In light of the potential momentum in foreign currency futures,
the surest play here is short dollars as all of these momentum contracts are
priced vs. the dollars. Thus, you could be wrong about one currency but since
the most heavily weighted currencies in the dollar index basket are
demonstrating collective momentum, the safer play is to short the buck. One
potential sticking point. Pounds here could diverge from the group due to the
increased likelihood the Brits will join the single-currency euro, taking down the
value of the pound against both the euro and dollar.Â
Notice that the Momentum
in debt — in September T-bonds
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10-year notes
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of slower-than-expected economic recovery (pointed out by Greenspan this week)
and lower interest rates, both hurt the dollar.Â
Bellies
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day due to lower “marketings” and what is anticipated to be one of
the lowest cold storage reports on record out after Friday’s close.