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.

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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 ( 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.

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