In 16-Jun’s Technical Blog we introduced some compelling factors that warn of a base/reversal count within the past year’s range that could produce protracted gains in the months ahead.  Yesterday’s break above 18-Jun’s 98.90 initial counter-trend high confirms a bullish divergence in very, very short-term momentum, defining 15-Jun’s 94.55 low as one of developing importance.  IN NO WAY is this admittedly minor mo failure sufficient to suggest anything more than another interim corrective hiccup within a downtrend that dates from at least 26-Mar’s 130.65 high.  But it IS enough to define that 94.55 low as a reliable low and support from which the a bullish punt can be objectively based and managed.  And given the upside potential we believe might lie ahead for the longer-term reasons cited below, the risk/reward merits of such a punt could be extraordinary.

As pointed out last week, we increasingly suspect that the decline from 08-May’s 114.15 high is a complete 5-wave Elliott sequence as labeled in both the 240-min chart above and daily log chart below.  The Fibonacci fact that the suspected 5th-Wave of this sequence from 03-Jun’s 102.40 high is identical in length (i.e. 1.000 progression) to early-May’s 1st-Wave down from 114.15 to 106.30 would seem to reinforce this count.  This said, a recovery above that 102.40 smaller-degree corrective high and short-term risk parameter remains required to confirm this count.  In this SCALE respect, we’re jumping the gun on concluding the end of this wave sequence.  However, we are comfortable with a defined risk of doing so at 94.55, acknowledging and accepting whipsaw risk (below 94.55) in exchange for larger nominal risk (above 102.40).

Additionally, waning downside momentum is clear on a daily basis below.  And again, a recovery above 100.75 in the then-prompt Jul contract is minimally required to CONFIRM this momentum failure.  But the fact that this market is having trouble sustaining trendy, impulsive downside behavior after breaking 06-Feb’s 97.40 obviously key low and support is a contributing factor to our base/reversal count.

On the next larger scale, former 104-to-105-handle-area support remains intact as a key new resistance candidate that could easily contain a broader bear market correction.  But once above levels like 100.75 and 102.40, we can only address that bridge when we get to it.  In the meantime, bulls would be in the driver’s seat with longs from current 98.70-area levels.

Additional compelling factors to this base/reversal count are shown in the weekly log chart below:

  • the market’s recent proximity to the lower-quarter of the past couple years’ range where the risk/reward merits of a continued bearish policy are questionable and especially
  • historically bearish sentiment/contrary opinion levels.

Indeed, it’s not hard to see both the Bullish Consensus ( and our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC at levels that have warned of and accompanied major, if intra-range recoveries over the past two years.  COMBINED with the more granular Elliott and momentum factors discussed above, we believe current 98.70-area prices offer an acute and extraordinary risk/reward opportunity from the bull side.

These issues considered, traders are advised to move to a new bullish policy and exposure at-the-market (98.70) with a failure below 94.55 required to negate this specific call, warrant its immediate cover and reinstate this year’s major downtrend.  In lieu of such sub-94.55 weakness and especially if this market can generate gains above 100.75 in the near future, we believe upside potential could be extraordinary to the 110-to-120-area.

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