We have, what looks like, an almost completed wave pattern in August Live Cattle. Once this bottom is in place we can expect 2-3 monts of counter-trend rally price action that should retrace 50-62% of the severe decline that began in late-March.
We have double bullish divergenc in momentum and price, often signaliing a snap-back of prices. That being said, wave 5 does not have 5 subwaves to count. This means we can expect one more new low as these waves play out. At that point, all the requirements will have been met for a completed wave pattern . There should be no surprise at that point of a major rally taking place. To get a clearer picture of the subdivisions of wave 5, we can look at the hourly chart. So far, we have 3 waves, and wave 4 may be near complete.
Another observation to note is that wave 5 appears to be shaping up as an ending diagonal. What is significant about that is ending diagonals often have their entire length retraced in about 1/3-1/2 the time it took to form. This means, if the bottom occurred at $101, prices should rally back up to above $107.17 in about 1.5-2 weeks time.
I have labeled a thrid chart as a less probable, but still valid interpretation. Price action in the next few days will make it evident which of the interpretations is correct.
Picking bottoms can be dangerous. The safest way to get on to a uptrend early is to wait for a 5-wave rally and then a 3-wave pullback to enter.
However, as August Live cattle makes new lows with more divergence, I would much rather be long this market then short it.
