RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Dec 22, 2022, 08:19 by Dave Toth

The subsequent fallout from 15-Dec’s bearish divergence in daily momentum discussed in that day’s Technical Blog has reached a larger-degree level with yesterday/today’s break below 08-Nov’s 135.76 larger-degree corrective low and our key bull risk parameter.  By failing below 135.76, the market has rendered Oct-Dec’s recovery attempt from 134.02 to 143.18 a 3-wave structure as labeled in the daily active-continuation chart below.  Left unaltered by a recovery above 143.18, this 3-wave rebound is considered a corrective/consolidative affair that warns of a resumption of the secular bear market that preceded it.  Per such, this 143.18 level serves as our new long-term risk parameter from which longer-term institutional players can objectively base non-bullish decisions like long-covers and resumed bearish exposure.

As the market has not yet broken 21-Oct’s 134.02 low and support however, we have to acknowledge the prospect for further intra-corrective-range chop and a rebound.  Per such, we will be watchful for a relapse countering bullish divergence in short-term momentum in the period immediately ahead to warn of such.  In lieu of such a mo failure and especially if this market breaks below 134.02 straight away, the market’s downside potential thereafter is indeterminable and potentially extreme.

On a shorter-term basis, the 240-min chart below shows the impulsive-looking decline from 07-Dec’s 142.91 high in the Mar contract that lists 13-Dec’s 139.77 low as the prospective 1st-Wave low of an eventual 5-wave sequence down.  A recovery above 139.77 is required to negate this specific count, so we’re defining this level as our short-term bear risk parameter pertinent to shorter-term traders with tighter risk profiles.  Recovery attempts shy of 139.77 are advised to first be approached as corrective selling opportunities.  

Finally, the weekly active-continuation chart below shows the magnitude of the secular bear market in which Oct-Dec’s recovery attempt falls well within the bounds of a mere correction as a result of the past week’s relapse.  We discussed some longer-term base/reversal elements from mid-Nov onward, but the bull failed miserably to perform when it had the chance to following late-Nov’s break above 28-Oct’s 140.92 initial counter-trend high.  Now, to resuscitate any broader base/reversal count, the market has to recoup 143.18.  Until and unless such strength is proven, a resumption of the secular bear trend to new lows below 134.02 is anticipated.

These issues considered, a bearish policy and exposure remain advised for shorter-term traders with a recovery above 139.77 required to negate this call and warrant its cover.  Longer-term institutional players have been advised to neutralize all bullish exposure and are further advised to move to a resumed bearish policy on a scale-up from at-the-market to the 137.50-area with a recovery above 139.77 required to pare this exposure and commensurately larger-degree strength above 143.18 required to reverse into a bullish policy.

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