RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

25-Jul’s breakout above 13-Feb’s 2.8230 high reaffirmed and reinstated our long-term bullish count introduced way back in 07Nov16’s Technical Blog that now requires a relapse below at least 30-Jun’s 2.7185 smaller-degree 1st-Wave high and key long-term risk parameter to jeopardize the impulsive integrity of this count.  And while we’ll discuss below reasons to be increasingly watchful for and aware of interim momentum failures, for the foreseeable futures such setbacks will be advised to still be approached as corrective buying opportunities.

Clearly, late-Jul’s bust-out to new highs resurrects the major uptrend from 18Jan16’s 1.9355 low and likely leaves 08-May’s 2.4725 low in its wake as the end of a suspected 4th-Wave correction within an eventual 5-wave sequence up.  This 4th-Wave setback stalled in the immediate area of the (2.4809) 38.2% retrace of Jun’16 – Feb’17’s 2.0130 – 2.8230 (3rd-Wave) rally to reinforce this count on a weekly log scale basis below.  And since this 3rd-Wave rally appears to have “extended”, a common Fibonacci application to project the length of the sequence-completing 5th-wave is its 1.000 progression relationship to the 1st-wave.

In this case the 1.000 progression of Jan-Mar’16’s 1.9355 – 2.3235 rally from 08-May’s 2.4725 low projects to the 2.9681-area.  As always however, such merely derived technical levels as various “bands”, channel and trend lines, the ever-useless moving averages and even the vaunted Fibonacci relationships we cite often NEVER have proven to be reliable reasons to buck a trend without an accompanying momentum failure.  And they never will.  Per such and as this major bull trend MAY be getting a little long in the tooth, technical focus shifts to MOMENTUM, which mainly means ensuring the bull sustains gains above prior corrective lows.

Copper Weekly Chart

Both the weekly log chart above and monthly log chart below show the expected increase in the sentiment indicators that will eventually contribute to a peak/reversal-threat condition that could be major in scope.  But traders are reminded that sentiment is not an applicable technical indicator in the absence of a confirmed bearish (in this case) divergence in momentum needed to, in fact, stem the clear and present uptrend.  Here again is the increasing focus on momentum.

This monthly chart also shows the major significance of the 3.0000-area.  The degree to which the 3.0000-area has any “psychological” impact is debatable.  But the fact of the matter is that this area supported the market for three years from Oct’11 until its break in Nov’14.  The market hasn’t seen 3.0000+ levels since.

This entire 3.0000-area must be approached as a resistance candidate of major proportions.  The combination of market sentiment’s return to historical heights and a prospectively completing 5-wave Elliott sequence adds to the case.  And for a little added gravy, 2.9999 is the 50% retracement of the entire secular bear market from Feb’11’s 4.65 high to Jan’16’s 1.9355 low (for what this derived is worth).

Copper Monthly Chart

Copper Daily Chart

Given our increasing focus on momentum, the daily chart above shows the developing POTENTIAL for a bearish divergence in momentum.  As a result of yesterday’s poke to yet another new high for the bull, the 240-min chart below shows that the market has identified Thur’s 2.8600 low as the latest smaller-degree corrective low the market needs to sustain gains above to avoid CONFIRMING this mo failure to the point of non-bullish action like long-covers.  In this regard 2.8600 is considered our new short-term risk parameter to a still-advised bullish policy.

Should the market fail below 2.8600 however, that mo failure would be a scale INsufficient to conclude anything more than another interim corrective setback within the still-unfolding major uptrend.  Indeed, the accelerated nature of the rally from mid-Jun’s low suggests an “extended” 3rd-Wave following a month-and-half’s worth of 1st- and 2nd-Wave base-building.  This further suggests a series of 4th-wave pullbacks and subsequent 5th-wave resumptions of the bull before the rally from 08-May’s 2.4725 low may be considered a complete 5-wave sequence.

As always, the issue of technical and trading SCALE comes into play in the more effective navigation of a peak/reversal process.  One cannot conclude a major peak/reversal following a momentum failure on a smaller degree.  It would be presumptuous and subjective to conclude the end of a major 5-wave sequence from May’s 2.4725 low following a mo failure below last week’s disproportionately minor corrective low.  This is not to say however that such a minor mo failure is not important to shorter-term traders with tighter risk profiles.

In sum, a bullish policy and exposure remain advised with a failure below 2.8600 required for shorter-term traders to step aside in order to circumvent the depths of what we’d suspect at that time to be another interim correction within the still-unfolding major bull.  At the expense of whipsaw risk, longer-term players may want to pare bullish exposure to more conservative levels on such a sub-2.8600 mo failure, but commensurately larger-degree weakness below 2.7185 remains required to negate our long-term bullish count altogether and warrant a total move to the sidelines.  In lieu of such sub-2.8600 weakness further and possibly accelerated gains remain expected.  This said, from a long-term perspective we will also tread increasingly carefully as the market approaches the 2.95-to-3.00-range where we fully expect a slowdown in the RATE of ascent marked by increasing momentum failures.

Copper 240 min Chart

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