Cattle Rebound Threatens Peak/Reversal Count, Doesn’t Negate It | RJO FuturesPosted 02/23/2017 9:44AM CT |
The market’s recovery yesterday above our short-term risk parameter at 116.65 negates the specific bearish count we introduced in 14-Feb’s Technical Blog but it doesn’t necessarily mitigate the broader peak/reversal threat from 19-Jan’s 120.325 high. There’s no question that at least the intermediate-term trend is up as a result of yesterday and today’s strength that defines 13-Feb’s 112.075 low as one of developing importance and possibly the end of a simple 3-wave correction down from 19-Jan’s 120.325 high ahead of a resumption of the major uptrend from last Oct’s 97.25 low. HOWEVER….
The past week’s recovery has thus far retraced 61.8% of Jan-Feb’s 120.325 – 112.075 decline and is well within the bounds of a peak/reversal PROCESS to an impressive 3-month rally. A break above 19-Jan’s 120.325 high and our key risk parameter remains required to truly negate a broader peak/reversal count.
From a geeky Elliott Wave perspective we believe the (B- or 2nd-Wave) correction to late-Jan initial counter-trend decline actually began from 01-Feb’s 112.75 low, with the subsequent drop from 07-Feb’s 116.65 high to 13-Feb’s 112.075 low considered a b-Wave “irregular” within the B- or 2nd-Wave correction that is now in its completing c-Wave stage that would be expected to peter out somewhere between the (117.175) 61.8% retrace and Jan’s 120.325 high. A micro momentum failure below yesterday’s 115.025 minor corrective low would be the first reinforcing evidence of this ultimately bearish count.
We would remind traders of the longer-term factors that warn of a broader peak/reversal environment as long as 19-Jan’s 120.325 high remains intact as a resistant cap and key risk parameter. These factors, introduced in 26-Jan’s Technical Blog, include:
- a confirmed bearish divergence in momentum that defines 19-Jan’s 120.325 high as the
- END of a 5-wave Elliott Wave sequence up from 13Oct16’s 97.25 low amidst
- historically frothy levels in our RJO Bullish Sentiment Index and the rejection thus far of
- a pair of long-term Fibonacci retracement relationships at 122.275 and 120.23 that have sandwiched Jan’s 121.45 high on a weekly log active-continuation chart basis below.
These factors will be nullified if/when the market recoups 120.325. Until and unless it does, we cannot ignore the broader bearish count that contends the current rebound is not only part of a typical peak/reversal PROCESS, but also that this rally may be presenting an outstanding risk/reward selling opportunity ahead of a major correction or reversal of Oct-Jan’s entire 97.25 – 120.325 rally.
These issues considered, shorter-term traders have been advised to move to a neutral/sideline position. We will be watching for a short-term mo failure below 115.025 that will arrest the current rebound and reject/define a more reliable high from which a resumed bearish policy cab then be objectively based and managed. Longer-term players are advised to maintain a cautious bearish policy and required further strength above 120.325 to negate this call and warrants its cover.