Cattle Relapse Defines New S-T Risk, Key Toggle Level

August 24, 2016 4:27AM CDT

This morning's break below Mon's 109.20 low reaffirms the intermediate-term downtrend introduced in 11-Aug's Technical Blog and leaves Mon's 111.80 high in its wake as the latest smaller-degree corrective high and new short-term parameter from which the risk of cautious bearish exposure can now be objectively rebased and managed.  A recovery above 111.80 is required to CONFIRM a bullish divergence in momentum to the point of non-bearish action like short-covers and cautious bullish punts.  In lieu of such 111.80+ strength, further losses- including a resumption of the secular bear trend to new lows below 105.25- should not surprise.

Cattle 60 min

Cattle Daily

This tight but objective risk parameter at 111.80 could be critical from a long-term perspective as the relapse from 04-Aug's 116.35 high could still be just a (B- or 2nd-Wave) correction within a BASE/reversal-threat environment from 21-Jul's 105.25 low that could be major in scope.  Unfortunately, the two market sentiment indicators we rely on heavily- the Bullish Consensus (marketvane.net) and our RJO Bullish Sentiment Index- are providing sharply contrasting signals.  The historically bearish 24% reading in the Bullish Consensus arguably reinforces a broader base/reversal environment.  By sharp contrast the still-frothy 72% reading in the RJO BSI representing 70K Managed Money long positions to just 28K shorts reportable to the CFTC can be considered a source of fuel for downside vulnerability that could be steep.

In sum, a cautious bearish policy remains advised with strength above 111.80 required to not only negate this call, but also resurrect a base/reversal count that could be huge and very opportunistic. In lieu of such 111.80+ strength further and possibly steep losses should not surprise. In effect, traders are advised to toggle directional biases and exposure around 111.80.

Cattle Weekly

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.