July Wheat - 2 to 3 Higher
July Corn - Steady
July Beans - 2 to 3 Lower
Last week was very eye opening for me. To learn/accept the fact that corn and beans have been in a corrective wave since last summer. As you'll remember, before last week I believed corn and beans were correcting from a up impulse since the lows last July to the February highs. I believed last summer was the end of a big correction (so much price decrease)
This would have caused the correction to be more shallow. The fact that the selloffs in corn and beans have been counter seasonal also clouded things.
As it turns out, the rally into February/March was still part of the larger A-B-C correction lasting about 12 months. This is a great example of losing the forest for the trees.
Here is Friday's updated corn continuation (July) chart with the big A-B-C labeled and the horizontal red line where I believe the fund buyers will begin to turn this ship around (up).
One of our clients has been asking me some very thoughtful and pointed questions about Fibonacci ratios and how each leg is structured and how to use this information to estimate where corn or beans will trade to.
The first thing to understand is that this concept is found everywhere in nature, including biology and some manmade structures. These calculations are estimations not perfectly accurate - some trees are more beautiful than others because they exhibit the most symmetry.
You'll need a calculator. We are going to dig into the latest down leg within the larger selloff that's been occurring in July Soybeans. In general, a leg is broken up into 5 smaller legs/waves with 1, 3 & 5 going with the main trend.
During a correction, the main direction is down and it is labeled A-B-C. A and C are each constructed with a smaller 1-2-3-4-5 legs. The second down leg (3) is normally the longest, with the first one being the shortest and the last one being in between the 1st and 3rd.
I am only breaking the C leg down into it's 1-2-3-4-5 parts. The C leg begins on the bean chart at the "and here @ 1447" label, then you will see the first leg is 61 cents and ends at 1385 price. The second leg labeled 3 is 89 cents and terminates at 1323 price.
61 cents times the Fibonacci ratio of 1.38 = 84 cents, or said differently, 3 leg is 1.33 times leg 1 - this is in the ballpark. We are looking for the last down leg (5) to be 70 to 75 cents long, because this is in the midrange of 61 and 89. 89 divided by 70 = the ratio of 0.787, which is very close to the .78 ratio.
You can use either number on top in the division to get a number below 1.0 or a number above 1.0.
The last and current down leg starting at 4 begins at 1348. 1348 minus 70 = 1278. 1348 minus 75 = 1273. Therefore, the estimated price level we are looking for is between 1278 and 1273. At this point, I expect July Soybeans to be exhausted to the downside.
Other ratio's like 0.62 could also be used. 89 times 0.62 = 55 cents. 1348 price minus 55 = 1293 price, which is a nickel higher than the 1288.50, July 22nd 2022 low.
My feeling, using all the data, is that beans will selloff closer to the lower numbers at about 1275. This is soybeans (wild), so more of a route of the longs seems
appropriate. However, if the new fund buyers are more eager, they could front run the 1288.50 number and stop nearer to 1293.
The main point is that these ratio's, used with other technical knowledge, can help a market participant estimate market moves and areas of support or resistance.
Let's see how this unfolds over the next few days. I tried to label all the pertinent information on the 4 hour July Bean chart. Check it out and take your time if you want to learn.
Here is the daily bean continuation for your reference. You can see the July 22nd 1288.5 low - red line at the lower chart.
...and you are always welcome to ask questions.
June S&P update:
The big ascending triangle that should be bullish is still working. A couple of trading days ago, price broke up out of the triangle. The buy target should be all time highs to the left. Good news for retirement accounts.
Notice the tiny narrow/sideways range of about 7 bars that the S&P just broke up from. A pattern within a pattern. Check out the chart.
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