Mirroring the major peak/reversal characteristics of those unfolding in U.S. Treasuries, overnight’s break below below Mon’s 173.58 low reaffirms the developing downtrend and leaves smaller-degree corrective highs in its wake at 174.57 and 175.02 that this market is now minimally required to recoup to even defer, let alone threaten a bearish count.  Per such, these levels represent our new micro- and short-term risk parameters from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a still-advised bearish policy and exposure.

On a broader scale and having blown away the (174.32) 1.618 progression of Nov’s initial 178.85 – 176.21 decline from 11-Dec’s 178.59 corrective high, the still-developing extent and magnitude of this bludgeoning down from that 178.59 high is highly characteristic of a 3rd-wave that warns of further losses ahead, at least a temporarily interruptive (4th-wave) correction and then another (5th-wave) resumption of the bear before a possible end to the major decline.  On this scale, a recovery above at least 10-Nov’s 176.21 (suspected 1st-Wave) low is minimally required to jeopardize the impulsive integrity of this broader bearish count.  Per such, this 176.21 level serves as our new long-term risk parameter from which longer-term institutional players can objectively rebase and manage the risk of a still-advised bearsh policy and exposure.

The weekly chart below shows the market’s return to the middle of the middle-half bowels of the past year-and-a-half’s 179-to-167-range where we never want to underestimate the perils of aimless whipsaw risk typical of such range-center environs.  Our shorter-term risk parameter identified above will come in handy in navigating this risk.  But until and unless this market recovers above at least 175.02, the trend is down on all practical scales and should not surprise by its continuance or acceleration.

In sum, a full and aggressive bearish policy and exposure remain advised with a recovery above at least 174.57 and preferably 175.02 required for shorter-term traders to step aside and commensurately larger-degree strength above 176.21 for longer-term institutional players to follow suit.  In lieu of such strength, further and possibly accelerated losses remain expected.

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.