Posted on Jan 18, 2024, 09:34 by Dave Toth

Today’s continued recovery, this time above 29-Nov’s 173.875 larger-degree corrective high and our key long-term bear risk parameter confirms our base/correction/recovery count introduced a month ago in 18-Dec’s Technical Blog and exposes potentially sharper gains straight away.  The hourly chart below shows a recovery that thus far has been very orderly and, frankly, quite deliberate.  But this recovery leaves a number of corrective lows and former resistance-turned-support levels in its wake that it now must relapse below to defer or threaten the still-developing suspected correction higher.

Smaller- and larger-degree corrective lows left in the wake of today’s continued uptrend are noted at 169.25 and 167.35 and serve as our new short- and longer-term parameters from which non-bearish decisions like short-covers and bullish punts can be objectively rebased and managed.  In lieu of weakness below these levels, further and, we believe, accelerated gains are likely straight away.

The now-former resistance area around the 173-handle-area is considered new near-term support.

On a broader scale, by recouping 29-Nov’s 173.875 large-degree corrective high, we can now conclude that 07-Dec’s 162.40 low completed a 5-wave Elliott sequence down from 19-Sep’s 196.60 high.  We believe the extent and 5-wave impulsive nature of Sep-Dec’s decline is the initial 1st-Wave of a new secular bear market in cattle prices that could span years.  To negate this long-term bearish call, the bull needs to take out Sep’s high(s).

This said, peak/reversal PROCESSES, especially prospective ends to secular bull markets, typically include a 2nd-wave corrective rebuttal that often times can be extensive in terms of both price and time, retracing 61.8% or more of the initial counter-trend 1st-wave.  In this case, the 61.8% retrace of Sep-Dec’s 196.60 – 162.40 decline cuts across at 182.75 on a log scale.  This derived Fibonacci level is NOT considered resistance, but merely an “area of interest” around which to beware a recovery-countering bearish divergence in momentum needed to arrest the recovery and reject/define a more reliable level from which non-bullish decisions like long-covers and bearish punts can only then be objectively based and managed.

Per a prospective peak/reversal process, we have three key reversal requirements:

  1. a confirmed bearish divergence in momentum of a scale sufficient to threaten the longer-term bull (SATISFIED)
  2. proof of trendy, impulsive 5-wave behavior on the initial counter-trend decline (SATISFIED), and, most importantly,
  3. proof of 3-wave corrective behavior on the subsequent (2nd-wave) corrective rebuttal (UNSATISFIED).

This 3-wave corrective behavior and countering bearish divergence in mo, perhaps around the (182.75) 61.8% retracement area is what we will be keeping a keen eye on in the weeks ahead, the confirmation of which could present one of the golden risk/reward selling opportunities of 2024.  In lieu of these requirements being met OR a relapse below our corrective lows and interim bull risk parameters at 169.25 and 167.35, further and possibly accelerated gains straight away are anticipated.

These issues considered, a bullish policy and exposure remain advised with a failure below 169.25 required for shorter-term traders to move to a neutral/sideline position and subsequent weakness below 167.35 for longer-term commercial players to follow suit.  In lieu of such weakness, further and possibly accelerated gains are anticipated straight away.

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