This morning’s failure below last Fri’s 129.20 corrective low and risk parameter discussed in Tue’s Technical Blog confirms a bearish divergence in momentum.  This mo failure defines Tue’s 142.45 high as one of developing importance and possibly the END of a 5-wave Elliott sequence from 11-Oct’s 92.20 low as labeled in the daily log scale chart below, where even a Fibonacci minimum 38.2% retrace doesn’t cut across until the 120.64-area.

It is crucial to note that we are NOT concluding the END of the past seven months’ impressive rally.  As a result of the extent and impulsiveness of Oct-Dec’s portion of this rally, any setback could easily be just a slightly larger-degree correction ahead of further extensive gains for quarters to come.  But even under thus count, a relatively minor correction of Oct-Dec’s extraordinary gains could produce NOMINALLY extensive losses that even the longest-term of bulls could find very uncomfortable.  Rather, we advise a more conservative approach to risk by stepping aside from profitable longs for the time being and exchanging whipsaw risk of having to re-establish longs above 142.45 for deeper nominal risk. 

Contributing to a peak/correction/reversal threat is the sharp run-up in our RJO Bullish Sentiment Index of the hot managed Money positions reportable to the CFTC to a 70% reading not seen in nearly three years.  Additionally, the monthly log active-continuation chart below shows Tue’s 142.45 high came within a smidgen of the (141.77) 38.,2% retrace of the secular bear trend from May’11’s 308.90 high to May’19’s 87.60 low.

These issues considered, traders have been advised to take profits on all bullish exposure and move to a neutral/sideline policy for the time being.  We fully anticipate some kind of corrective rebuttal to this week’s relapse, but we’ll have to wait for technical structure before trying to navigate the end of this current slide and that rebound or resumption of the new major bull.  Stay tuned.  This market is getting even more interesting.

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.