RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

The past week’s continued and relatively steep break reinforces our peak/reversal count introduced in 18-Feb’s Technical Blog and leaves Tue’s 239.15 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to even defer this developing bearish count and expose an interim corrective hiccup.  Per such, this 239.15 level serves as our new mini risk parameter from which shorter-term traders can objectively rebase and manage non-bullish decisions like long-covers and cautious bearish punts.

10-Feb’s 260.45 high remains intact as an obviously important risk parameter the market is required to recover above to negate this peak/reversal threat and reinstate the secular bull trend.

From a longer-term perspective and out of deference to the magnitude of the secular bull trend, a failure below 03-Jan’s 220.70 larger-degree corrective low in the May contract and/or below that day’s 220.55 corrective low in the then-prompt Mar contract remains required to, in fact, confirm a bearish divergence in WEEKLY momentum that will break the secular bull market.  Combined with historically extreme levels in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC, the elements typical of a major peak/reversal environment will be evident on a commensurately larger-degree momentum failure below 220.70/.55.  This would be more than sufficient for even long-term commercial players to jettison any remaining bullish exposure and prepare for a correction or reversal that could be major in scope.

These issues considered, a neutral-to-cautiously-bearish policy remains advised for shorter-term traders with a recovery above 239.15 minimally required to defer or threaten this call in favor of an interim corrective rebound.  A cautious bullish policy and exposure remain OK for longer-term commercial players with a failure below 220.70 required to negate this call and warrant an immediate move to neutralize any/all bullish exposure in order to circumvent the depths unknown below that threshold.

IF/when the market fails below 220/.70/.55, we believe this will confirm the initial counter-trend (A- or 1st-wave) of a major correction or reversal lower.  At some subsequent point however, we would fully anticipate a potentially extensive (B- or 2nd-wave) corrective rebuttal to this initial counter-trend decline within the broader peak/reversal PROCESS that would offer a much-preferred risk/reward opportunity from the bear side.  But we will cross that bridge if/when the market takes us there.  Once below 220.55, the extent of the initial counter-trend decline is indeterminable and potentially severe.  Hence the need to cover any/all remnant bullish exposure.

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