I continue my conversations with Jeffrey Kennedy, editor of Elliott Wave International's Futures Junctures Service, which brings subscribers daily and monthly opportunities in commodities.
Vadim Pokhlebkin: Jeffrey, spring is in the air, the Dow is off its lows, and so are some of the commodities: Crude oil trades above $50 a barrel, corn prices have seen a push higher, and so have a few other commodity markets. In your Daily Futures Junctures, you focus on short-term opportunities, but what about the bigger picture?
Jeffrey Kennedy: As you know, I update the bigger-picture views every month in my Monthly Futures Junctures. (MFJ; new, March issue is online now – Ed.) Three months ago, I warned my subscribers that from the January 2009 highs in soybeans, corn and wheat, Elliott wave patterns called for strong selloffs. Markets have indeed fallen since then, and now, to answer the question if the declines are over, we again must look at chart patterns.
One of the basic questions you need to ask yourself when looking at market move for the first time is this: Do its sub-waves overlap or not? Presently, corn futures show the clearest Elliott wave pattern, and here is one of its charts that I show in the March MFJ. (Online now; some labels have been erased for this publication – Ed.)
Notice that the selloff in corn from the January 2009 top unfolded in seven waves – an important number when it comes to wave patterns. Can you tell me why?
VP: Well, I know that a pattern called Double Zigzag, for example, unfolds as a seven-wave move – that is, A-B-C-X-A-B-C. It’s a corrective pattern, so waves within it are choppy and overlapping.
JK: Exactly. And how would you characterize the January selloff in corn?
VP: Overlap central.
JK: That’s one way to put it – but yes, the move looks highly corrective. To apply the Wave Principle correctly, it’s imperative that wave patterns not only show the proper substructure, but that they also exhibit the right personality – meaning that they act like either an impulsive or a corrective wave. And this one does; I explain more in the March issue.
VP: So, from what you’re telling me, it sounds that once this correction is over – if it’s not already, because I see that price has already broken above the upper line of your trend channel – a rally should start?
JK: Yes. Chart evidence that I show my subscribers in the March MFJ strongly suggests that the January selloff in corn is a correction, which will ultimately be more than fully retraced. I give the exact upper price targets in the issue. (Read it online now – Ed.) The bigger picture is also similar for the rest of the grain complex, wheat and soybeans.
VP: Thanks. So, commodities are out of the woods, then?
JK: You mean, LONG-term? Well, first of all, each commodity has its own Elliott wave path, and secondly, to get the really big picture, you have to study wave patterns of larger degrees. Looking at those – and I show them in the March MFJ – it seems likely that ultimately, the expected rallies will also prove corrective – at their degree of trend.
VP: Thanks for the update, Jeffrey.