RJO FuturesCast

Oil prices are holding steady as of Thursday afternoon enhanced by strong economic data prints with unemployment claims falling more than expected and business spending accelerating in April. Prices have been weighing the prospect of Iranian oil coming back online with OPEC+ set to meet June 1^st to assess any potential changes to easing production cuts. Concerns remain regarding Indian demand as Covid-19 has continued to ravish the country, the world’s third largest consumer. Crude stocks fell 1.662 million barrels with implied gasoline readings coming of 9.479 million barrels per day and now approaching an all-time high, according to the EIA. The market remains bullish trend with oil volatility (OVX) continuing to fall towards the 30 handle with today’s range seen between 62.02 – 67.80.

For the second time in a month, coffee prices have broken out of tight consolidations level with a sharp upside move. Coffee is at multi-year highs, coffee should be able to maintain upside momentum over the rest of this week. Diminishing views for brazils 21/22 off year Arabica crop, have been underscored by the latest forecast from Brazilian government agency which projects 31% decline from last seasons output. A little more rain has been added to Brazil weather forecast this week, but then switching back to mainly dry by next week.

Daily technical indicators have crossed over up, which is a bullish indication. The near term upside objective is at 16120. The next area of resistance is around 15900 and 16120. Support comes in at 15245 and below that at 14800.

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.

Looking at the June 10-year note this morning, we have a high of 133-02, a low of 132-265 and currently sit at 133-00.  The note has been somewhat of a confusing trade the last ten days as many Fed speakers have stated that the economy is robust and acting strong with continued strong economic numbers.  Normally when the Fed says things like we see it as bearish, but the market has been somewhat resilient.  In addition, many have continued to express the need for the Fed to start to taper, meaning buying less treasuries as the economy is showing good strength.  One explanation of why the treasuries have acted well in the last week is the China has come out and said it’s concerned with all the volatility we have seen in many of agricultural sectors and might start to import and purchase less.  So, we will see how that plays out for the rest of the week.

Looking at tecnicals for the note, I see good resistance at 133-125 level which coincides with the 100-day moving average and support comes in at 132-21 which is the 50-day moving average.  So, any move above or below those stated levels should start a new leg.  Not much in the way of economic news today besides the five-year auction, so barring any big surprises I would expect today’s trade to be quiet and orderly.

Indices opened strong this morning with the Dow and S&P making runs at their all-time highs from earlier in the month.  The Nasdaq and Russell also look strong, but they will have a bit more ground to make up before they can say the same.  Inflation fears have market participants worried about the Fed beginning to taper.  We’re seeing more Fed participants suggesting current conditions warrant a conversation on the topic, but Jerome Powell doesn’t seem to be there just yet.  He has said in the past that he doesn’t have an issue with letting inflation run a bit hot for a while to compensate for all the time we spent below their target.  Today’s PCE reading (Fed’s favorite inflation measure) was the highest in nearly 30 years.  Perhaps that will get him to move off his “transitory” stance at the FOMC meeting in two and a half weeks. 

Personal incomes saw the biggest month over month drop ever.  Combine that with inflation, and it seems like grounds for…  more stimulus!  In fact, President Biden will be releasing more details on his proposed $6 trillion dollar budget at some point today.  That figure would represent the largest budget increase since World War II. 

Equity futures will trade Sunday night and until noon on Monday.  I hope everyone has a wonderful Memorial Day weekend. 

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.