After correcting lower from the Nov. 30 highs, March corn futures have been in a tight consolidative pattern the last 10 sessions. Overnight strength is attempting to push beyond this consolidative range with momentum indicators turning back higher. Long-term trends are still high in corn as evidenced by the major moving averages sitting 10 cents to 50 cents per bushel below spot prices. When looking at an active-continuation chart, it is debatable whether corn prices are in the fourth wave corrective sequence of a still unfolding five-wave Elliot sequence, or whether the fifth wave was already put in with the Nov. 30 highs. If the latter is true, then current price strength would be considered corrective ahead of a resumption of new lows below $4.15. If the former is true, however, then another round of new highs above $4.40 would still be forthcoming. With this in mind, we will be looking to objective risk parameters for clues as to what the next major leg of this market will be. To the downside, we like the $4.14 1/2 corrective low from Dec. 2 and to the upside we like the $4.29 corrective high from Dec. 1 and obviously contract highs at $4.39 1/2.
January soybeans have a similar technical construct as corn with recent highs giving way to consolidative trade, but the jury is still out as to whether the correction is beginning a new trend or part of the previous one. January soybeans are $0.56 to $2.17 above the 50- and 200-day moving averages, highlighting how strong the long-term uptrend still is. Somewhat of a concerning trend has been the performance of on-balance-volume (OBV) the last 20 sessions with the indicator producing a reading of minus 36,925 contracts. OBV is tabulated by summing the previous 20 sessions’ volume totals with positive values for up days and negative values for down days. A positive reading would indicate more volume has been generated on up days the last three weeks and vice versa. OBV has crashed since the end of November, suggesting bears have had the upper hand while in this corrective phase. The latest CFTC data showed a much more balanced structure from a fund standpoint, something which could help a retest of recent highs.