Stay Alert, Cattle Bulls

December 21, 2016 9:05AM CST

We do not try to pick tops.  But traders are urged to keep a keen eye on 15-Nov's 112.65 corrective low and new short-term risk parameter identified in Mon's Technical Blog the market now needs to sustain gains above to maintain a more immediate bullish count.  As discussed, this is an admittedly very short-term corrective low.  A failure below 112.65 would only allow us to conclude the end of the rally from 05-Dec's 1008.175 next larger-degree corrective low.  Given some interesting derived Fibonacci relationships however as well as a textbook Elliott Wave sequence, even a short-term failure below 112.65 could morph into a more extended correction of the past couple months' major rally.

LC-Feb17 60min Chart

We typically try to refrain from geeking-out traders with too much Elliott-speak, but sometimes it's just the best way to get our technical point across.  Looking again at the hourly chart above, the rally from 05-Dec's 108.175 low has THUS FAR unfolded into a textbook 5-wave Elliott sequence as labeled.  Shifting to the daily log scale chart below, this 5-wave rally from 108.175 could also be the COMPLETING 5th-Wave of the broader sequence up from 13-Oct's 97.80 low.  If correct, this elusive "5th-of-the-5th-Wave" prospect would present an uber-opportunistic risk/reward situation from the "non-bull" side (i.e. long-covers and cautious bearish punts).

If this weren't enough circumstantial, subjective evidence of a prospective peak, the daily log chart below also shows the rally from 07-Nov's 101.45 low spanning a length 61.8% longer (i.e. 1.618 progression) of Oct/early-Nov's initial 97.80 - 106.825 rally.  This 1.618 Fibonacci progression relationship cuts across at 117.025.  Yesterday's high was 116.825.

LC-Feb17 Daily Chart.gif

Additionally, on a weekly log active-continuation chart basis below, 116.775 is the 50% retrace of this year's 141.90 - 96.10 portion of the 2-year secular bear market.  So we have an arguably complete textbook Elliott wave sequence on two sales and a pair of major Fibonacci progression and retracement relationships cutting across within a quarter-of-a-cent of one another around yesterday's 116.825 high.  The only non-top-picking problem however is that THE MARKET HAS YET TO FAIL.  Moreover, it is thus far holding above former 114.45-area resistance from last week as new support.

A slip below this 114.45-to-.114.00-range will provide the first and very minor threat to the bull.  Subsequent weakness below 112.65 will be the next key event and warrant a move to the sidelines by shorter-term traders and pared bullish exposure by longer-term players.  In lieu of such sub-112.65 PROOF of weakness however, the trend remains up on all scales and should not surprise at all by its continuance or acceleration.  As typically, we don't know where or how high this bull can go, but we know precisely where it SHOULDN'T go: below 112.65.  In sum, a full bullish policy remains advised with a failure below 112.65 required to threaten this call enough for both short- and longer-term traders to take defensive action.

LC Weekly Chart.gif

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