For months and months since Nov 2016 and with the very rare occasion of a spasm correction, this market has just been a dog.  In late-May following a bullish divergence first in daily momentum and subsequently in WEEKLY momentum amidst historically bearish sentiment, we discussed the developing prospect of a base/reversal threat that could be major in scope.  Over the past two weeks however, we believe the extent of this current relapse and gross failure to sustain trendy, impulsive behavior when the bull had every opportunity in the world to do so above 04-Jun’s 106.15 initial counter-trend high has this market on the verge of returning to dog status.

We introduced what we thought was just interim weakness in 08-Jul’s Technical Blog when the market first failed below 02-Jul’s 109.05 corrective low, breaking at least the portion of the bull trend from 19-Jun’s 96.25 low.  Now the market’s on the verge of breaking that 96.25 low that we had as a long-term bull risk parameter because by breaking this level the market would be rendering the entire May-Jul recovery as only a 3-wave and thus corrective affair as labeled in the daily log chart below.

Given the extent of the past month’s relapse and just the general, day-in-and-day-out inability to mount any kind of upside whatsoever, we believe 05-Jul’s 115.65 high completed a correction within the secular bear trend ahead of that bear trend’s resumption to new lows below 07-May’s 87.60 low.  The 240-min chart above shows that the past week’s continuation of this slide leaves 26-Jul’s 102.65 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to confirm a bullish divergence in momentum to even defer, let alone threaten the bear.  Subsequent strength above 08-Jul’s 105.30 (suspected 1st-Wave down) low is required to jeopardize the impulsive integrity of a long-term bearish count and resurrect a broader base/reversal count.  Per such these 102.65 and 105.30 levels are considered our new short- and longer-term risk parameters from which a resumed bearish policy an be objectively based and managed.

The weekly (above) and monthly (below) log scale charts show the magnitude of the secular bear market.  As a result of the extent and developing impulsiveness of the past month’s relapse, we believe May-Jul’s recovery attempt to be only a 3-wave and thus corrective structure that now warns of a resumption of the secular bear trend that preceded it.  Minimum strength above 105.30 is require to threaten this count.  Until and unless such 105.30+ strength is proven, traders are advised to return to a bearish policy ahead of what could be protracted losses in the weeks and months ahead.

These issues considered, traders are advised to maintain or establish (at-the-market; 97.05 OB) bearish exposure with strength above at least 102.65 and preferably 105.30 required to threaten or negate this specific call.  In lieu of such strength further and possibly accelerated losses are expected in the prospective resumption of the secular bear trend to new lows below 87.60.

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.