Trail S-T Cable Risk to 1.2511

December 20, 2016 2:17AM CST

The market's break yesterday and overnight below last Thur's 1.2376 low reinforces our bearish count and leaves Fri's 1.2511 high in its wake as the latest smaller-degree corrective high and new short-term risk parameter the market needs to sustain losses below to maintain this call.  The market's failure to do so would not only confirm a bullish divergence in momentum, it would expose this month's relapse attempt as a 3-wave and thus corrective affair that might contribute to a broader BASE/reversal-threat environment.  Per such traders are advised to trail protective buy-stops to 1.2512 on shorts from 1.2700 recommended in 07-Dec's Trading Strategies Blog .

BP-240min-Chart

The daily chart below shows a textbook example of a case of former support from the 1.28-handle from Jul-thru-Sep turning into new resistance following early-Oct's collapse below this area.  Combined with the (1.2768) 50% retrace of the decline from 06-Sep's 1.3446 high to 11-Oct's 1.2090 orthodox low, the market rendered 06-Dec's 1.2776 high an objective risk parameter from which to base non-bullish decisions AFTER the market "acknowledged" that area as resistance with 07-Dec's confirmed bearish divergence in momentum.

A couple weeks on continued weakness allows us to objectively conclude 06-Dec's 1.2776 high as our new longer-term risk parameter the market now is required to recover above to expose a broader BASE/reversal environment.  In lieu of such 1.2776+ strength Oct-Dec's 1.2090 - 1.2776 recovery attempt is considered a 3-wave and thus corrective affair consistent with the secular bear trend to at least one more round of new lows below 1.2090.

BP-Daily-Chart

BP-Weekly-Chart

Understandably historically bearish sentiment and waning downside momentum shown in the weekly log close-only chart above are warning flags of a prospective base/reversal environment, but as always the market must first PROVE "non-weakness" with a confirmed bullish divergence in momentum of a scale sufficient to break the major downtrend.  In this case and minimally, we believe that now requires a recovery above at least 06-Dec's 1.2776 high on an intra-day basis discussed above and/or a weekly close above 02-Dec's 1.2729 close.  In lieu of such strength it would be premature to conclude that the secular downtrend shown in the monthly log scale chart below isn't the dominant technical factor.

In sum, a bearish policy and exposure remain advised with a recovery above 1.2511 required for shorter-term traders to move to the sidelines and for longer-term players to pare bearish exposure to more conservative levels.  Ultimately however a recovery above 1.2776 is required threaten our long-term bearish count enough for even long-term players to move to the sidelines.  In lieu of such strength we anticipate a resumption of the secular bear to at least one more round of new lows below 1.2090.

BP-Monthly-Chart

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