RJO FuturesCast

Daily Futures Market News, Commentary, & Insight


Yesterday’s break below 01-Feb’s 112.75 initial counter-trend low reinforces our broader peak/reversal count introduced in 30-Jan’s Technical Blog and leaves 07-Feb’s 116.65 high in its wake as the latest smaller-degree corrective high and new short-term risk parameter this market is now minimally required to recoup to threaten this bearish count.  In lieu of such 116.65+ strength further and possibly steep losses are anticipated straight away.

Live Cattle 60 min Chart

Live Cattle Daily Chart

As discussed in recent updates the combination of:

  • 30-Jan’s bearish divergence in momentum
  • a textbook 5-wave Elliott sequence up from 13-Oct’s 97.25 low
  • historically bullish levels in our RJO Bullish Sentiment Index shown in the weekly log chart below and
  • a pair of Fibonacci retracements at 120.23 and 122.275

conspired on a peak/reversal environment that suggests 19-Jan’s 120.325 high COMPLETED the rally from last year’s low and started a correction or reversal lower that could be extensive in both time and price.  Strength above 116.65 is now minimally required to threaten this count while subsequent strength above our new long-term risk parameter at 120.325 is required to negate it.  In lieu of such strength we anticipate further and possibly severe losses that could easily eclipse the (105.49) 61.8% retrace of Oct-Jan’s 97.25 – 120.325 rally due to the extent to which the Managed Money community has its neck sticking out on the bull side.  Indeed, at a whopping 92% bullish consensus reflecting 114K long positions reportable to the CFTC versus only 10K shorts, this market is easily vulnerable to potentially significant losses as it forces the capitulation of this long-&-wrong exposure.

In sum a full and aggressive bearish policy remains advised with strength above at least 116.65 required to take defensive action.

Live Cattle Weekly Chart


Readers of our updates know that we’ve been leery of a similar peak/reversal threat in hogs since late-Dec.  Following the extent of yesterday’s break below last Thur’s 70.62 low and area of former resistance-turned-support, we are once again concerned about a peak/reversal count that could be every bit as extensive as that outlined above in cattle.  On a short-term basis yesterday’s resumption of mid-last-week’s decline leaves yesterday’s 71.77 high in its wake as the latest smaller-degree corrective high and new short-term risk parameter this market is now obligated to recoup to render the sell-off attempt from 08-Feb’s 72.65 high a 3-wave and thus corrective affair that would re-expose the 5-month bull.  In lieu of such 71.77+ strength there’s no way to know yesterday’s break isn’t the start of a larger-degree (C- or 3rd-Wave) decline that could expose steep losses straight away.

Lean Hogs 60 min chart

Lean Hogs Daily Chart

The daily log scale chart above shows that the market has yet to fail below our longer-term risk parameter defined by 27-Jan’s 66.62 larger-degree corrective low.  In light of the reaffirmation of a peak/reversal environment in cattle and very similar technical construct to cattle, we advised traders to once again bias towards a peak/reversal count in exchange for the possible whipsaw risk.

Here too, the daily (above) and weekly (below) log scale charts show:

  • waning upside momentum
  • an arguably complete 5-wave Elliott sequence up from 30Sep16’s 55.05 low and
  • historically frothy levels in our RJO Bullish Sentiment Index typical of exactly such peak/reversal-threat environments.

Lean Hogs Weekly Chart


Finally and once again, the quarterly log scale close-only chart below shows the market’s return to the middle of the approximate 54-to-80-median that has caged the vast majority of its past 40-YEAR price history after the pendulum swung outside both ends of it over the past 5 years.  While its currently indeterminable if there’s some new paradigm that will maintain such wilder volatility in the years ahead, odds would seem to favor this market “settling down” within the range for a spell rather than jetting off to 80+ levels after just spending time below its historical average.

These issues considered, traders are advised to neutralize all previously recommended bullish policy and exposure and move to a cautious bearish policy from current 69.80-to-70.50-range prices ahead of a potentially severe relapse in the weeks and perhaps even months ahead.  Strength above 71.77 is required to threaten this call and re-expose the bull that would warrant defensive action.

Lean Hogs Quarterly Chart

RJO Market Insights

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