Ongoing Intra-Range Crude Oil Erosion Defines New S-T Risk | RJO Futures

March 8, 2017 9:31AM CST

Overnight's break below last week's 52.54 low reaffirms the intermediate-term downtrend and leaves yesterday's 53.80 high in its wake as the latest smaller-degree corrective high this market now needs to sustain losses below to maintain a more immediate bearish count.  In this regard 53.80 is considered our new short-term risk parameter from which interim non-bullish decisions like long-covers and cautious bearish exposure can be objectively rebased and managed.

Crude Light 240 Chart

This relatively tight but objective risk parameter will come in handy as we navigate the price action from 03-Jan's 55.24 high shown in the daily log active-continuation chart below.  We know for a fact that Nov-Jan's uptrend has been broken.  We've known this since 09-Jan's momentum failure discussed in that day's Technical Webcast.  With that uptrend broken the ONLY formation options we had and still have to choose from are correction or reversal.

It does not matter HOW one describes it- i.e. in Elliott Wave terms or with candlesticks or Dow Theory or Market Profile or point-&-figure- as these are all "mere languages" with which to describe the market's position and expected future price movements within one of only three states every market will ever be in:  trend, consolidation or reversal.  Navigating such non-trending market conditions is brutally tough and is much more likely to result in losing trading decisions then in trending environments, so identifying specific risk parameters (like 53.80) and moving to a more conservative approach to risk assumption is emphasized during such periods.

Crude Light Daily Chart

We remain biased towards a bull-market-correction scenario from 03-Jan's 55.24 high because of these three facts:

  • the market has only been able to unfold against Nov-Jan's uptrend LATERALLY- as opposed to laterally-to-LOWER- which would seem to underscore underlying strength
  • the market has thus far failed to retrace even a Fibonacci minimum 38.2% of Nov-Jan's 42.20 - 55.24 rally which would seem to underscore underlying strength
  • the market has thus far sustained gains above SIX MONTHS of former 51-handle-area resistance that, since broken in mid-Dec, has held firmly as new support.

MINIMALLY, to expose either a steeper correction OR reversal lower, the market remains required to break 08-Feb's 51.22 next larger-degree corrective low and key risk parameter.  And even then a reversal lower might be suspect as the market would still be above a preponderance of 2016's price action and well within the bounds of a mere correction within the long-term uptrend from Feb'16's 26.05 low.

These issues considered, a cautious bearish policy remains advised for shorter-term traders with a recovery above 53.80 required to negate this call and warrant a move to the sidelines.  Longer-term players remains OK to maintain a cautious bullish policy with a failure below 51.22 required to move to the sidelines.  In effect the market has identified 53.80 and 51.22 as the key directional triggers heading forward.

Crude Light Weekly Chart

 


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