Posted on Jun 15, 2023, 08:34 by Dave Toth

Overnight’s clear break above last week’s 2.380 initial counter-trend high confirms a bullish divergence in daily momentum that reinforces 01-jun’s 2.136 low as the end of a textbook 5-wave Elliott sequence down from 19-may’s 2.816 high and exposes at least the intermediate-term trend as up.  The important by-products of this recovery are the market’s definition of smaller-degree corrective lows at 2.294 and 2.206 that it’s now required to sustain gains above to maintain a more immediate bullish count and possibly the start or continuation of a BASE/reversal count that could be protracted in scope.  A relapse below 2.294 and especially below 2.206 in the now-prompt Jul contract will render this month’s recovery attempt a 3-wave and thus corrective affair and re-expose the broader bear.  Until and unless such weakness is proven, and especially amidst historically bearish sentiment levels, traders are advised to not underestimate the extent to which this market might now be vulnerable to higher levels.

Former 2.380-area resistance is considered new near-term support ahead of further and possibly protracted gains straight away.

The daily log chart of the Jul contract below shows a bullish divergence in momentum, but this is only of a scale that allows us to conclude 01-Jun’s 2.136 low as the end of the decline from 19-May’s 2.816 larger-degree corrective high.  To break the major downtrend from 01Dec22’s 5.45 high, commensurately larger-degree strength above 2.816 remains required.  Per such, this 2.816 level remains intact as our key long-term bear risk parameter.  What this market has instore between spot and 2.816 is anyone’s guess, which highlights the key technical and trading issue of SCALE and traders directional risk acceptance commensurate with their personal risk profiles.  Shorter-term traders with tighter risk profiles are advised to move to a cautiously bullish stance with a failure below at least 2.294 and especially 2.206 required to threaten and then negate this call.  Longer-term commercial players are OK to pare bearish exposure to more conservative levels, but strength above 2.816 remains required to threaten the secular bear trend and expose a major correction or reversal higher.

  • waning downside momentum on a WEEKLY scale (above) amidst
  • historically bearish sentiment/contrary opinion levels not seen in nearly three years.
  • an arguably complete and massive 5-wave Elliott sequence down from Aug’22’s 10.028 high as labeled above, and
  • the market’s return to the lower-quarter of its massive but lateral historical range shown in the monthly log chart below.

Indeed, we’ve described a technical condition over the past few months that’s identical to the major base/reversal process that unfolded between Feb and Jul 2020 before Aug’20’s ignition of a massive THREE-YEAR, $8.50, 560% secular bull trend.  While we certainly are NOT forecasting another such massive bull move, we’ve discussed for many weeks now to poor risk/reward metrics of a continued long-term bearish policy “down here” and under the technical facts listed above.  No, we cannot conclude a major reversal from piddly short-term proof of strength like todays.  But until and unless this market re-weakens below levels like 2.294 and 2.206, both shorter-term traders and longer-term commercial players are urged to be aware of base/correction/reversal developments that warn of a multi-quarter recovery that could easily produce levels above $3.00 or even $4.00.

These issues considered, shorter-term traders are advised to move to a cautious bullish stance at-the-market (2.43) with a relapse below at east 2.294 and especially 2.206 required to threaten and then negate this call and warrant its cover.  Longer-term commercial players are advised to are bearish exposure to more conservative levels and jettison remaining exposure on a recovery above 2.816.  Longer-term players also have the option of neutralizing all bearish exposure and acknowledge and accept whipsaw risk below 2.206 in exchange for steeper nominal risk above 2.816.

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