Technicals, December 9, 2011; 8:55am
Whether this morning's new Globex lows below 09-Nov's key 86.80 low will be corroborated by day-session prices remains to be seen, but the reaction to this morning's WASDE report does nothing but reinforce the weakness and vulnerability that was exposed following 01-Dec's momentum failure below 90.50 whilst sentiment levels remained historically bullish. As a direct result of yesterday and today's losses, the market has defined Tue's 89.30 high as the corrective high this market is now required to recoup to threaten the past two months' developing decline enough to warrant moving to a neutral policy. In lieu of such a confirmed bullish divergence in momentum needed to arrest this clear and present downtrend, the market's downside potential is indeterminable and should not be underestimated.
From an Elliott Wave perspective, bull hopefuls could pose the prospect that the sharp drop from 30-Nov's 92.35 high is the completing C-Wave of a major bull-market correction. Concluding this at this juncture of course would ignore the broader bearish prospect that this decline is the 3rd-Wave of a reversal lower that, again, given the stubbornly bullish sentiment levels, could produce massive losses. As it is always tactically wise to bias towards a wave count that is consistent with the broader trend as opposed to one that bucks the trend, we advise a bearish policy until or unless this market proves strength above at least 89.30.
In addition to this market rejecting the area around the (92.64) 50% retrace of this year's 104.15 - 82.40 decline on a weekly log active-continuation chart basis below, the most glaring bearish factor is the stubbornly bullish sentiment accorded this market despite the past seven weeks' erosion. Indeed, at a still-frothy 89% level reflecting 77K Managed Money long positions reportable to the CFTC to just 9.5K shorts listed at the bottom of our CFTC page, our MRT Bullish Sentiment Index shows ample fuel for continued downside vulnerability and possibly capitulation.
These issues considered, a bearish or hedged policy is advised from current 87.10-area prices with strength above 89.30 required to threaten this view enough to warrant moving back to a neutral/sideline position. In lieu of such 89.30+ strength, traders are also advised not to underestimate the extent of this market's downside vulnerability.
RJO Market Research and Trading (RJO MRT) brings you the latest research on commodities and futures. They specialize in technical and fundamental analysis on all your major markets including: financial, agricultural, energy, foreign exchange, soft and metal markets.
As a hub for information, RJO MRT offers several forms of delivery to meet the needs of a vast audience. They strive to stay at the front of the markets by providing their followers with everything from market insight to trade strategies.
RJO MRT prides itself with using a combination of technical conditions and fundamental inputs such as economic or crop reports to help guide their viewers towards driving price discovery.