Cattle Relapse Reinforces Peak/Reversal Count, Defines New S-T Risk | RJO Futures

February 9, 2017 10:55AM CST

Yesterday's failure below Mon's 115.15 corrective low confirms a bearish divergence in short-term momentum that defines Tue's 116.65 high as the END of the recovery from 01-Feb's 112.75 low.  Against the backdrop of a broader peak/reversal count introduced in 26-Jan's Technical Blog we believe this relapse defines that 116.65 high as the end or upper boundary of another interim correction ahead of further and possibly steep losses.  The Fibonacci fact that this recovery attempt stalled in the immediate area of the (116.54) 50% retrace of Jan-Feb's 120.325 - 112.75 decline would seem to reinforce this bearish count.  In this regard 116.65 is considered our new short-term risk parameter from which a bearish policy can be objectively rebased and managed by shorter-term traders with tighter risk profiles.

Live Cattle 60 min Chart

Live Cattle Daily Chart

Contributing mightily to a peak/reversal-threat process that could be fairly major in scope are:

  • a confirmed bearish divergence in daily momentum above that defines 19-Jan's 120.325 high as the end of
  • a complete 5-wave Elliott sequence from 13Oct16's 97,25 low amidst
  • historically frothy levels in our RJO Bullish Sentiment Index and
  • the market's rejection of a pair of Fibonacci retracement levels at 122.275 and 120.23 that sandwich mid-Jan's 121.45 high on a weekly log scale active-continuation chart below.

Indeed, it is perhaps the whopping 93% reading in our RJO BSI reflecting 119K Managed Money long positions reportable to the CFTC versus just 9K shorts that is the most compelling peak/reversal-threat evidence in the list above that could leave this market vulnerable to a steep correction of the 3-month, 23% rally in the days and weeks immediately ahead.

These issues considered, a bearish policy remains advised with strength above 116.65 required for shorter-term traders to move to the sidelines and longer-term players to pare bearish exposure to more conservative levels.  In lieu of such strength further and possibly steep losses remain anticipated straight away.

Live Cattle Weekly Chart

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