We touched on this two weeks ago in 06-Apr’s Technical Blog.  And after very labored price action on the past couple weeks’ recovery attempt, we believe it’s a very pertinent factor once again:  historically bullish Managed Money long exposure despite this market being mired within the middle-half bowels of a massive lateral range.


(We suspect fundamental reasons)

It’s one thing for bullish sentiment and long exposure to rise, often times dramatically, when the market is in a clear and present uptrend.  But the 240-min chart above and daily log chart below show this market merely treading water after late-Mar’s bearish divergence in momentum from the 76.4% retrace of Dec-Feb’s 142.45 – 97.40 collapse after what looks to be a textbook 3-wave and thus corrective recovery attempt from 97,.40 to 26-Mar’s 130.65 high and key long-term risk parameter.

IF the market can recoup that pivotal 130.65 high, we’ve no problem at all with frothy bullish sentiment and exposure.  But the facts of the matter are that this market has:

  • thus far rejected the upper-quarter of the past four months’ range
  • provided trendy, impulsive price action on late-Mar’s initial counter-trend move down and, most importantly,
  • provided extraordinarily labored, corrective behavior on the past couple weeks’ recovery attempt.

Until this market can recoup at least 09-Apr’s 122.60 high in the now-prompt Jul contract, we believe this recovery attempt is a (B- or 2nd-Wave) correction that warns of a resumption of late-Mar’s downtrend that preceded it.  And once below 06-Apr’s 114.05 low, we believe this market can fall apart because of the extent to which the Managed Money community has its neck sticking out on the bull side.

The weekly (above) and monthly (below) log scale charts show RJO’s proprietary RJO Bullish Sentiment Index rising once again to an 81% level reflecting a whopping 28K Managed Money long positions to just 7K shorts.  Again, why?  With the market merely wafting around the middle-half bowels of a 87 – 142-range that has constrained prices for the past year-and-a-half, such frothy bullishness seems misguided.  And only a glance at these charts is needed to see that such levels in our RJO BSI has warned of and accompanied extensive declines in the past. These issues considered, traders are advised to move to a cautious bearish policy and exposure at-the-market (117.10 OB) with a recovery above 122.60 required to negate this specific call and warrant its cover.  In lieu of such 122.60+ strength, we anticipate further and possibly steep, protracted, if intra-range losses straight away.

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