RJO FuturesCast

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Yesterday’s break to another new low for our bearish count introduced in 27-Mar’s Technical Blog leaves yet another corrective high in a litany of corrective highs from which a bearish policy can be effectively rebased and managed.  The 240-min chart below shows Fri’s 99.45 high as the latest smaller-degree corrective low this market is now minimally required to recover above to even defer, let alone threaten the bear.  Indeed, a recovery above 99.45 would confirm a bullish divergence in very short-term momentum, BUT such a minor mo failure would only allow us to conclude the end of the downtrend from 03-Jun’s 102.40 next larger-degree corrective high, itself a short-term risk parameter the market’s got to recoup to complete a 5-wave Elliott sequence down from 08-May’s 114.15 high.

Interestingly however, yesterday’s 94.55 low makes the suspected 4th-Wave of this sequence down from 102.40 the exact same length (i.e. 1.000 progression) of the 114.15 – 106.30 1st-Wave of this sequence, a not uncommon Fibonacci progression relationship in wave theory.

No, we will not be able to conclude a larger-degree base/reversal count from such admittedly minor strength above 99.45 or even 102.40, but because of ancillary reasons discussed below, traders are urged to have a very short leash on a continued bearish policy “down here” and an itchy trigger finger on a bullish punt if this market starts recovering above these levels.

The daily log chart below shows the nicely developing POTENTIAL for a bullish divergence in momentum.  Strength above 03-Jun’s 100.75 high in the then-prompt Jul contract will not be able to be ignored as the CONFIRMATION of this signal to the point of non-bearish action like short-covers and cautious bullish punts.  Such 100.75+ strength and even a recovery above 03-Jun’s 102.40 high in the now-prompt Sep contract will only allow us to conclude the end of the downtrend from 08-May’s 113.15 high, but NOT the broader bear from 26-Mar’s 130.65 high.  Commensurately larger-degree strength above a goodly amount of former support around the 104-to-105-handle-area from late-Apr until late-May that now serves as a key new resistance candidate is minimally required to suggest the entire Mar-Jun downtrend may be over.

Given this backdrop of waning downside momentum, an arguably complete wave count and some very well-defined corrective highs and risk parameters, the fact that these elements exist while the market is flirting with the lower-quarter of a range that has encapsulated this market for the past TWO YEARS is intriguing to say the least.  Additionally, market sentiment/contrary opinion levels are pressing historical lows that have warned of and accompanied previous, if intra-range base/reversal processes that make for a very compelling case and opportunity.

IF, as we’ve discussed recently, Dec’19’s 142.45 high COMPLETED clear 3-wave correction from May’19’s 87.60 low and the secular bear is poised to resume, then it’s imperative “down here” for the bear to continued to maintain trendy, impulsive behavior lower where ACCELERATED LOSSES to multi-year lows should not surprise.  But if this market starts recovering above levels like 102.40, 100.75 and even 99.45, it will be hard to ignore the prospect and opportunity of another intra-two-year-range rebound that could be extensive.

These issues considered, a bearish policy remains advised with a recovery above 99.45 required for shorter-term traders to pare or neutralize exposure and even take a punt from the bull side.  Further gains above 100.75 are reason for longer-term players to pare or neutralize exposure to circumvent the heights unknown of a correction or reversal higher that could be extensive in scope.  In lieu of a recovery above at least 100.75 however, further and possibly accelerated losses should not surprise.

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