Copper Correction Complete? Silver Next? | RJO Futures

May 11, 2017 8:24AM CDT

JUL COPPER

At a minimum, the market's failure overnight to sustain recent losses below our short-term risk parameter at 2.5470 confirms a bullish divergence in short-term momentum and identifies Mon's 2.4725 low as the END of the decline from 01-May's 2.6945 high.  This defines that 2.4725 low as our new short-term risk parameter the market is now obligated to break to reinstate a broader bearish count and from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

At a maximum this mo failure could have completed a major correction from 13-Feb's 2.8230 high and has re-exposed what could be the new secular bull market from Jan'16's 1.9355 low.

Copper 240 min Chart

Copper Daily Chart

Way back in 22-Mar's Technical Blog we speculated that a larger-degree correction could target the 2.48-to-2.45-range marked by the (2.4809) 38.2% retrace of Jun'16 - Feb-17's 2.0130 - 2.8230 rally shown in the weekly log chart below and Dec'16's 2.4480 4th-Wave corrective low of lesser degree.  Combined with what looks to be only a 3-wave decline from 13-Feb's 2.9230 as labeled in the daily chart above and a return to more neutral levels in market sentiment that won't inhibit a move in either direction, we must acknowledge the prospect that today's admittedly short-term momentum failure could morph into a more extensive move higher, including a resumption of the 16-month uptrend to new highs above 2.8230.

Copper Weekly Chart

Indeed, only a glance at the weekly log chart above and monthly log chart below is needed to see that the very long-term trend is copper prices is up and that the past three months' sell-off attempt is only a corrective hiccup in this trend.  Commensurately larger-degree strength above 01-May's 2.6945 larger-degree corrective high and key risk parameter remains required to CONFIRM Feb-May's decline from 2.8230 to 2.4725 as a 3-wave and thus corrective affair ahead of a resumption of the 16-month bull.  But until and unless this market fails below 2.4725, the odds of such a broader bullish count have increased as a result of overnight's bullish divergence in short-term mo.

These issues considered, shorter-term traders have been advised to move to a neutral/sideline position while longer-term players are advised to pare bearish exposure to more conservative levels and jettison the position altogether above 2.6945.  Needless to say a relapse below 2.4725 will negate this call, reinstate the 3-month downtrend and expose further and possibly steep losses thereafter.

Copper Monthly Chart

 

JUL SILVER

As a result of Tue's continuation of the the past month's relative meltdown, the 240-min chart below shows that the market has identified last Fri's 16.53 as the latest smaller-degree corrective high the market is now required to sustain losses below to maintain a more immediate bearish count.  Its failure to do so will confirm a bullish divergence in momentum, end the decline from 17-Apr's 18.655 high and expose at least a correction higher, and possibly a major reversal.

Silver 240 min Chart

Silver Daily Chart

This tight but objective risk parameter may come in handy given the market's proximity to the extreme lower recesses of the 5-month range bounded by 20Dec16's 15.675 low shown in the daily chart above and weekly log chart below.  Along with a relatively low 36% reading in the Bullish Consensus (marketvane.net) measure of market sentiment it's not hard to find base/reversal-threat factors and conditions.

These issues considered, traders are advised to pare bearish exposure to more conservative levels at-the-market (16.375) and jettison the exposure altogether on the immediate recovery above 16.53.  Subsequent setback attempts after a 16.53+ breakout would then be advised to be approached as corrective buying opportunities with a failure below Tue's 16.06 low required to negate that call.

Silver Weekly Chart

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.