RJO FuturesCast

Impressive rally in gold this week takes out key resistance levels and potentially a very positive weekly close. At the time of this writing June gold is trading $1,783! The next key level on the way up is $1,788. A close above $1,788 will encourage the gold bulls and likely drive this rally towards the $1,820-$1,825 range. I’m confident that gold has bottomed and that the rally will continue and likely spend some time consolidating in the $1,820 to $1,850 range.

The US dollar has been trending lower for weeks now and that obviously helps support gold prices, however, it wasn’t until the dollar dropped below .9200 that gold was able to breakout and close above $1,760. So, these are two key levels that you must pay attention to. Gold must hold above $1,760 and the dollar needs to stay below .9200.

Platinum has a base in the $1,150 to $1,155 range. The trend is sideways to up. A close above $1,200 in the July platinum is needed to rekindle the rally back towards $1,250. The next test of $1,250 should quickly carry the rally to $1,300.

Oil prices are nearing a four-week high as the global demand outlook continues to improve with Chinese daily crude processing jumping 19.7% on the back of strong demand for fuel. Oil inventories fell to the lowest since February and refinery utilization reached the highest since the onset of the pandemic with East Coast stockpiles falling to the lowest in 30 years, according to the EIA. This comes amid an upward revision to the global demand forecast by OPEC as well as a report from the International Energy Agency (IEA) that global supply and demand is set to rebalance in the back half of the year. Oil volatility (OVX) has continued to fall, now down nearly 15% on the week, as the market remains bullish trend with today’s range seen between 58.93 – 64.26.

Reports continue to paint the picture of a very bullish outlook for coffee prices, due to a major production deficit. Our friends at the Hightower Group have stated that “the bullish supply outlook for the 2021/22 is highlighted by a likely 30% or larger decline in Brazil’s output, so seeing Brazil’s March coffee exports fall short of last years total could indicate that farmers may be starting to hold back on marketing their remaining supply”. This should pave the way for a revisit to the 1.40 level in short time.

From a technical perspective, May coffee has is beginning a reversal up H&S pattern with a break above the pattern’s 1.30 neckline. If this pattern follows through to completion, it carries a measuring objective to 1.39. The head of this pattern has found support and clearly taken a bounce from the 200-day moving average, found at the 1.20 level.

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Posted on Oct 14, 2022, 07:42 by Dave Toth

On the heels of mid-Sep-to-early-Oct's steeper, accelerated, 3rd-wave-looking recovery, the past week-and-a-half's boringly lateral chop is first considered a corrective/consolidative event that warns of a continuation of the uptrend that preceded it to new highs above 04-Oct's 891.0 high.  This count remains consistent with our broader base/correction/recovery count introduced in 13-Sep's Technical Blog following that day's bullish divergence in short-term momentum above 07-Sep's 809.5 minor corrective high detailed in the hourly chart below.

The important takeaway from this month's lateral, sleepy price action is the definition of Wed's 851.5 low as the end or lower boundary of a suspected 4th-Wave correction.  A failure below 851.5 will confirm a bearish divergence in daily momentum and defer or threaten a bullish count enough to warrant non-bullish decisions like long-covers.  A failure below 851.5 will not necessarily negate a broader bullish count, but it will threaten it enough to warrant defensive measures as the next pertinent technical levels below 851.5 are 13-Sep's prospective minor 1st-Wave high at 813.8 and obviously 08-Sep's 766.0 low.  And making non-bullish decisions "down there" is sub-optimal to say the least.  Per such, both short- and longer-term commercial traders are advised to pare or neutralize bullish exposure on a failure below 851.5, acknowledging and accepting whipsaw risk- back above 04-Oct's 891.0 high- in exchange for much deeper and sub-optimal nominal risk below 766.0.

On a broader scale, the daily log scale chart above shows the developing potential for a bearish divergence in daily momentum that will be considered confirmed below 851.5.  This chart also shows the past month's recovery thus far stalling in the immediate neighborhood of the (888.0) Fibonacci minimum 38.2% retrace of Apr-Sep's entire 1128 - 766 decline).  COMBINED with a failure below 851.5, traders would then need to be concerned with at least a larger-degree correction pf the past month's rally and possibly a resumption of Apr-Sep's major downtrend.

Until and unless the market fails below 851.5 however, we would remind longer-term players of the key elements on which our bullish count is predicated:

• a confirmed bullish divergence in WEEKLY momentum (below) amidst
• an historically low 11% reading in out RJO Bullish Sentiment Index and
• a textbook complete and major 5-wave Elliott sequence down from 29-Apr's 1128 high to 08-Sep's 766.0 low.

Thus far, the market is only a month into correcting a 4-MONTH, 32% drawdown, so further and possibly protracted gains remain well within the bounds of a major (suspected 2nd-Wave) correction of Apr-Sep's decline within an even more massive PEAK/reversal process from 17-May's 1219 high on an active continuation basis below.

These issues considered, a bullish policy and exposure remain advised with a failure below 851.5 required to defer or threaten this call enough to warrant moving to a neutral/sideline position.  In lieu of such weakness, we anticipate a continuation of the past month's rally to new highs and potentially significant gains above 891.0.

Adam provides viewers with insight to the April Bitcoin futures contract ahead of the Coinbase IPO.

Stocks continue their charge higher. We saw new all-time highs in the Nasdaq, S&P, and Dow, while the Russell is still a bit under five percent from its 3/15 high. This recent run higher has been impressive to say the least. The S&P put in its most recent low on 3/25.  Since then, the market has gained nearly 9% off that low. The rally included a twelve-session run of higher lows on the daily chart. That streak was broken on Tuesday, but we also saw a new ATH close that afternoon.  For the same time period, the Dow has rallied 6.8% from its low, and the Nasdaq is up 11.5%. 

Data continues to be encouraging. Retails sales and jobless claims yesterday were impressive. Consumer sentiment missed the lofty expectation of 89.0 this morning, but the 86.5 reading is still an improvement from the 84.9 reading we saw in March. Housing data remains strong and should continue to be as weather improves. The Fed has very little concern about the early warning signs of inflation and will continue to be accommodative. Stimulus money is seemingly everywhere, and Americans are getting vaccinated at high rates. While corona virus cases haven’t declined to the levels many would have hoped for just yet, they’re likely to do so. Consumers also saved 1.7 trillion dollars not traveling, going to restaurants, etc.  As they continue to feel safer, you can bet they’ll be looking to put some of that to use.  While there are also a great deal of reasons to be concerned about these levels we are seeing (and continue to build upon), the market seems to have little concern for them in the short-term.  

Posted on Nov 08, 2022, 07:51 by Dave Toth

In Fri's Technical Webcast we identified a minor corrective low at 2.6328 from Thur as a mini risk parameter the market needed to sustain gains above to maintain a more immediate bullish count.  The 240-min chart below shows the market's failure overnight below this level, confirming a bearish divergence in very short-term momentum.  This mo failure defines Fri's 2.8172 high as one of developing importance and a parameter from which very short-term traders can objectively base non-bullish decisions like long-covers.

Given the magnitude of the past three weeks' broader recovery however, this short-term momentum failure is of an insufficient scale to conclude anything more than another correction within this broader recovery from 26-Sep's 2.1877 low.  Indeed, overnights failure below 2.6328 only allows us to conclude the end of the portion of the month-and-a-half rally from 31-Oct's 2.4822 next larger-degree corrective low.  2.4822 is the risk parameter this market still needs to fail below to break the uptrend from 18-Oct's 2.3526 low while this 2.3526 low remains intact as the risk parameter this market needs to fail below to break the month-and-a-half uptrend.  From an intermediate-to-longer-term perspective, this week's setback falls well within the bounds of another correction ahead of further gains.  This is another excellent example of the importance of technical and trading SCALE and understanding and matching directional risk exposure to one's personal risk profile.

The reason overnight's admittedly minor mo failure might have longer-term importance is the 2.8172-area from which it stemmed.  In Fri's Technical Blog we also noted the market's engagement of the 2.8076-to-2.8159-area marked by the 61.8% retrace of Jun0-Sewp's 3.2758 -2.1877 decline and the 1.000 progression of Sep-Oct's initial 2.1877 - 2.6185 (suspected a-Wave) rally from 18-Oct's 2.3526 (suspected b-Wave) low.  We remind longer-term players that because of the unique and compelling confluence of:

• early-Aug's bearish divergence in WEEKLY momentum amidst
• historically extreme bullish sentiment/contrary opinion levels in our RJO Bullish Sentiment Index
• an arguably complete and massive 5-wave Elliott sequence from Mar'20's 0.4605 low to Jun's 4.3260 high (as labeled in the weekly log active-continuation chart below) and
• the 5-wave impulsive sub-division of Jun-Sep's (suspected initial 1st-Wave) decline

The recovery attempt from 26-Sep's 2.1877 low is arguably only a 3-wave (Wave-2) corrective rebuttal to Jun-Sep's decline within a massive, multi-quarter PEAK/reversal process.  Now granted, due to the magnitude of 2020 -2022's secular bull market, we discussed the prospect for this (2nd-Wave corrective) recovery to be "extensive" in terms of both price and time.  A "more extensive" correction is typified by a retracement of 61.8% or more and spanning weeks or even months following a 3-month decline.  Per such, the (suspected corrective) recovery from 26-Sep's 2.1877 low could easily have further to go, with commensurately larger-degree weakness than that exhibited this week (i.e., a failure below at least 2.4822) required to consider the correction complete.  Indeed, the daily log chart above shows the market thus far respecting former 2.6185-area resistance from 10-Oct as a new support candidate.

These issues considered, very shorter-term traders have been advised to move to a neutral/sideline position following overnight's momentum failure below 2.6328, with a recovery above 2.8172 required to negate this call, reaffirm the recovery and re-expose potentially significant gains thereafter.  For intermediate- and longer-term players, a bullish policy and exposure remain advised with a failure below 2.4822 required to threaten this call enough to warrant neutralizing exposure.  We will be watchful for another bearish divergence in momentum following a recovery attempt that falls short of Fri's 2.8172 high that would be considered the next reinforcing factor to a count calling that 2.8172 high the prospective end to the month-and-a-half 2nd-Wave correction.  In lieu of such, a resumption of the current rally to eventual new highs above 2.8172 should not surprise.