RJO FuturesCast

A very impressive rally in gold this week brings the market back towards the pivotal $1,900 level. The bulls will need to see a close today above $1,895 and then a close above $1,900. It shouldn’t take much to get back to November highs around $1,50 to $1,960 range.

You can say the rally is about an additional stimulus agreement, Dollar weakness or possible government shutdown. Taken together, these things all add up to the same thing. More money. Print more money. Spend more money. This is all they know how to do. After the FOMC Meeting conclusion this week, Chairman Powell reminded us that we face significant challenges due to the virus. The Fed is fully committed and will use every tool in their box to hit their targeted rate of inflation. They already let us know also, that there will be NO rate hikes thru 2021. Most would agree that there’s no sign or at least no concerns about inflation. So, let me ask you this. Have you seen what’s going on in the energies, crude and gasoline? How bout soybeans? How bout copper?

I’m telling you now, that this is the early stages of the next big bull market in commodities. The signs are there. Look at the Money Supply at record highs. Look at what the Fed is willing to do. We now have several vaccines being distributed and the economy will have a huge rebound as businesses around the globe begin to re-open. Demand will return because there’s tons of cash out there! Gold will break out above $2,000 again, and that will become the new bottom in gold.

This week we saw silver trade to the upper end of the sideways range its been in since the second half of September. With positive moves higher on Tuesday, Wednesday, and Thursday, The Jan silver contract reached a weekly high of 26.20, a level not seen in over a month. This week’s rally had many bullish factors, reports of progress on a US stimulus package, continued pressure on the US dollar, and a dovish take away from this week’s FOMC meeting. The Fed looks to continue asset purchases and let inflation run which is supportive for both gold and silver. There has been a little bit of a pullback to start Friday’s session with the market unable to extend this week’s gain through support at this time. With the weakening dollar, low rates, and the Fed not looking to curtail inflation a longer-term rally in silver could be developing. We would need to see this rally continue up to the next resistance point of 27.50. First support comes in around 25.15 and if that level is broke expect the market to trade down to around 24.00 to 24.50.

Oil prices are continuing their advance this morning amidst continued optimism in economic recovery, aided by the prospect of relief and continued vaccine rollouts and the subsequent impact on fuel demand. China and India are leading the Asian recovery move with record refining demand in India, which along with the continued crash in the US Dollar, which broke down to a 21/2-year low on Thursday, has only lent further support. In addition, US inventories fell more than expected coming in by 3.1 million barrels, according to the EIA. The market remains bullish trend but is signaling immediate term overbought with oil volatility (OVX) suggesting a move a lower with today’s range seen between 44.95 – 48.80.

March coffee futures have been breaking out recently, clearing all levels of resistance, mostly in part due to the continued bullish outlook for 2021/2022 crop year. This bullish supply outlook is due to the extremely dry weather in Brazil earlier this year, and the subsequent wet weather events precipitated by El Nina have not proven to be enough to offset the tight supply. Although there is wet weather forecasted for this week for the Brazilian States of Sao Paulo and Minas Gerias, these rains also most likely will not be enough to offset the supply effects of the earlier dry weather.

The UK and EU have also seen less demand due to Covid restrictions, but the announcement of the distribution of the Pfizer vaccine, along with several other vaccines on the horizon, give the much awaited promise that many will gain the confidence to overcome their fears of returning to coffee shops and restaurants, and ultimately their lives as they knew them.

From a technical perspective, strong support is being held at the 200-MA, resting at 1.14. In addition, a break above the key resistance level of 1.25 is also very bullish, and RSI and Volume levels holding steady. It is likely that corrective action will take place, back down to 120, before another leg higher is made.  

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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.

Looking at the 10-year notes today, we have a high of 138-005 and a low of 137-095. We should have a very interesting day. Many are expecting Congress to pass a Covid-19 stimulus bill today, but details of what is included in that bill remain unknown.  Two big sticking points that remain are; does congress give money to most democratic states that are in deep financial distress, and are there going to be checks sent out to Americans. There has been talk the checks could be in the $300-$600 range as Pelosi is pushing for higher and McConnel pushing for the lower. We shall see. The other important item on the docket today is the last FOMC meeting today with the announcement coming at 1:00 PM central followed by a Q&A a 1:30 by chairman Powell. Consensus is that there will be no change by the Federal Reserve, but traders will be listening closely for any changes in the wording, which is very important because it gives traders insight on what the fed is thinking go forward. So, as we wait on both announcements today traders should be cautious looking ahead for early afternoon volatility.

Three of the four major indices are lower this morning in the wake of the opening bell.  Stimulus talks continue to be encouraging, but we still can’t seem to get over the goal line there.  Despite the fact that it’s been nearly ¾ of a year since we last approved some form of relief/stimulus, the market continues to get excited every time these talks seem to heat up.  One has to wonder how much of the proposed $900 billion package is already priced in. 

We also have more news on a significant hack to SolarWinds that effected several high profile users like the US Treasury and the US National Nuclear Security Administration.  It is believed that the upwards of 18,000 users were affected by the hack.  Of those, the hackers have pursued seem to have focused on about 40 including the previously mentioned government agencies and Microsoft. 

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.