S&P Vulnerable Below Minimum 2,687

December 17, 2018 8:48AM CST

While the market hasn't broken 10-Dec's rogue 2583 intra-day low yet, we believe the extent of Fri/today's relapse renders last Mon-to-Wed's recovery attempt to Wed's 2687 high a 3-wave and thus corrective event consistent with our broader bearish count.  Per such we are identifying that 2687 high as our new short-term risk parameter this market is now minimally required to recoup to threaten a resumed bearish count that we believe could be major in scope.

E-Mini S&P 500 240 Minute Chart


Last week's relapse and resumption of early-Dec's decline reinforces our broader bearish count that identifies the recovery attempt from 29-Oct's 2603 low to 03-Dec's 2814 high as a 3-wave and thus corrective affair that re-exposes Sep-Oct's downtrend that preceded it.  Commensurately larger-degree strength above 03-Dec's 2814larger-degree corrective high is now minimally required to mitigate this broader peak/reversal count and re-expose the secular bull.

The threat here is that now that the market has resumed Sep-Oct's downtrend, the market's downside potential is indeterminable and potentially severe.

E-Mini S&P 500 Daily Chart


Possibly, looking at the weekly log chart below, the mid-to-lower-2500-handle-area that contained Jan-Apr'18's correction will once again prove supportive, limiting the bear threat.  But until and unless this market stems the clear and present downtrend with a confirmed bullish divergence in momentum- that requires a recovery above a prior corrective high like 2814 or even 2687- there is no way to RELY on any prospective support level to hold.

Other downside reference points are the (2485-area) 1.000 progression of Sep-Oct's 2947 - 2603 decline from 03-Dec's 2814 corrective high (an area that would also equate this correction to May'15 - Feb'16's 15% correction) and also the (2442-area) 38.2% retrace of the complete 5-wave Elliott sequence from Feb'16's 1802 low to 21-Sep's 2947 high.  But these levels too are advised to be taken with a grain of salt.

E-Mini S&P 500 Weekly Chart


On a very long-term basis shown in the weekly log chart above and monthly log chart below, market sentiment levels have eroded to historically low levels that have warned of and accompanied virtually every major base/reversal environment in the past.  And we have no doubt at all this these levels will warn of and contribute to the end of this current swoon and another outstanding risk/reward buying opportunity that will be of a much longer-term nature.  HOWEVER, traders are reminded that sentiment/contrary opinion is not an applicable technical tool in the absence of an accompanying confirmed bullish (in this case) divergence in momentum.  And such a confirmed mo failure, as always, stems from a recovery above a prior corrective high or an initial counter-trend high, neither requirement of which has been satisfied.

If we're lucky, this correction is only correcting the bull trend from Feb'16's 1802 low to Sep'18's 2947 high.  But there's the prospect that this year's 2947 high completed a much longer-term 5-wave Elliott sequence that dates from July 2010's 1003 low as labeled in the monthly log chart below.  And if this is the case, a multi-quarter correction to the 2300-to-2100-range would be quite feasible.  We're not forecasting such a correction, but until and unless this current slide is stemmed by a confirmed bullish divergence in momentum, there's no objective way to eliminate ANY amount of downside potential, including a run at 2100.

These issues considered, a bearish policy and exposure remain advised ahead of further and possibly protracted losses straight away with a recovery above 2687 minimally required to even defer, let alone threaten this call and warrant countering decisions.

E-Mini S&P 500 Monthly Chart

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

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.