The Chart du Jour
While equities continued to melt last week, and the Nasdaq quickly approaches its 50% decline mark from its March highs, few might have noticed that almost every product of the farmbelt has been rallying of late. We saw modest but consistent upmoves on Friday in all of corn, wheat, oats, soybeans, and soybean oil. Wheat in particular experienced an "outside reveral up" two weeks ago, followed by good follow-through with a high close this past week.
Is something finally beginning to brew here after many prior false starts? We have been burned at least once before for turning prematurely bullish the depressed Wheat market, but we have to admit liking the look of the March Wheat chart above. The Fibonacci rhythm of the past descent looks nice and tight (as depicted by all of our arrows), and the Elliott wave count was impulsive with a clear five waves up between Sep 12th and Oct 12th (Wave 1?), and a-b-c corrective ever since then (wave 2?). With prices now advancing above the 100-day moving average, we think there is at least a good shot that a wave 3 advance may now be underweigh. If so, don't be surprised to see Wheat testing its 200-day moving average shortly, with a gap on the chart further up also representing a natural target to get filled.
Meanwhile in equities, subscribers will note that two of the eight charts we focused on with specific downside objectives back on November 8th have been fulfilled. Three more are getting close, and three still have a ways to go. Overall, we would not be surprised to see further downside probing early this coming week (particularly given the weakish index closes Friday), but a sharp reversal higher now getting more and more likely coming out of the December 6th-10th cycle time window. While we would still love to see the S&P spike down to our 1241 Fibonacci objective in the near term, we will officially get neutral the market during this time window, and excepting financial sector stocks, would encourage readers to book profits on shorts where they have them. This is only the second time this year we have so advised, the first coming back on May 24th.
We would also like to refer readers to some excellent analysis at LowRisk.com comparing the the current Nasdaq bear market to the Nikkei bear market that began back in December 1989. This is a comparison we ourselves have made on several occasions before, and LowRisk.com does a good job updating it on a micro-perspective basis. The implications are similar: at least a small bounce is now due, although the longer term picture remains wholly suspect.
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