RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Nov 14, 2022, 07:14 by Dave Toth

In 03-Nov’s Technical Webcast we introduced the prospect for a larger-degree base/correction/recovery from 31-Oct’s 70.21 low in the then-prompt Dec but, given the magnitude of this year’s major reversal lower, any such base/recovery process is likely to include a corrective retest of that 31-Oct low.  Moving to the now-prompt Mar23 contract and starting with last Wed’s short-term bearish divergence in momentum below a very, very minor corrective low from 07-Nov at 83.32, we believe that the past few days’ flagging price action reinforces the prospect that 08-Nov’s 87.15 high is the 5th-wave end to the rally from 31-Oct’s 70.10 low and that the market is poised for a (B- or 2nd-Wave) correction lower.  Per such, we’re identifying 87.15 as our new short-term risk parameter from which traders can objectively base non-bullish decisions like long-covers and cautious, interim bearish punts.

For what it’s worth, we’ve noted the 38.2%, 50% and 61.8% retraces of early-Nov’s 70.10-to-87.15-rally at 80.64, 78.62 and 76.61, respectively.  These merely “derived” and so-called technical levels are NOT considered support, but rather just ‘areas of interest” around which to beware a relapse-countering bullish divergence in momentum, the combination of which would provide a potentially very favorable risk/reward opportunity on the bull side.  A recovery above 87.15 mitigates this interim peak/setback count, reinstates the early-Nov bull and exposes potentially sharp gains thereafter.

From a longer-term perspective, the list of base/correction/recovery elements is compelling:

  • at least waning downside momentum on a daily basis above, if not a confirmed bullish divergence in mo
  • an “outside WEEK up” the week of 31-Oct’s 70.10 low (lower low, higher high and higher close than the prior week’s range and close)
  • a return to sentiment/contrary opinion levels that haven’t been this low in over TWO YEARS
  • an arguably textbook complete 5-wave Elliott sequence down from 16-Aug’s 117.49 high as labeled above.

This is a unique and compelling list of technical facts that warns of at least a potentially protracted correction to or reversal of this year’s whopping 55% meltdown until and unless negated by a relapse below 31-Oct’s 70.10 low and new key long-term bull risk parameter.

Finally and on an even broader monthly log scale basis, the chart below shows the market’s position back deep within the middle-half bowels of its historical range where we advise approaching the odds of aimless whipsaw risk as higher, warranting a more conservative approach to risk assumption.

These issues considered, traders are advised to move to a neutral-to-cautiously-bearish position from current 84.25-area prices for the time being, with a recovery above 87.15 required to negate this call and warrant its immediate cover ahead of further and possibly protracted gains.  Until and unless such 87.15+ strength is proven, we anticipate a corrective setback in the week or two ahead, possibly to the 78.62-to-76.61-area r lower, where we’ll keep a keen eye on momentum and a relapse-stemming bullish divergence in momentum that we believe will present a very favorable risk/reward opportunity from the bull side.  A relapse below 70.10 is required to negate this base/recovery count altogether, reinstate this year’s major bear and expose potentially steep losses thereafter.

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