RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Aug 23, 2022, 10:09 by Dave Toth

Today’s clear, impulsive break above 12-Aug’s 6.43 high reaffirms our interim base/correction/recovery count introduced in 26-Apr’s Technical Webcast and leaves Thur’s 6.05 low in its wake as the latest smaller-degree corrective low this market would now be expected to sustain gains above to maintain this count calling for a larger-degree correction of May-Jul’s entire 7.66 – 5.63 decline.  Per such, 6.05 is considered our new short-term risk parameter from which traders can objectively rebase and manage the risk of an interim bullish policy and exposure.

Former 6.35-to-6.40-area resistance would be expected to hold as new near-term support.

The daily (above) and weekly (below) log scale charts show what we suspect is a (2nd-Wave) correction of May-Jul’s 7.66 – 5.62 decline within a major PEAK/reversal environment.  We believe this market has satisfied the first two of our three key reversal requirements on a major scale:

  1. a confirmed bearish divergence in WEEKLY momentum and
  2. proof of impulsive, 5-wave behavior in May-Jul’s initial counter-trend decline.

The key third requirement is proof of 3-wave corrective behavior on a subsequent recovery attempt remains required.  To satisfy this requirement, this market needs to arrest the clear and present uptrend with a confirmed bearish divergence in momentum from a level shy of 16-May’s 7.66 high on a scale sufficient to conclude the recovery from 22-Jul’s 5.63 low is a 3-wave affair.  We believe a failure below Thur’s 6.05 smaller-degree corrective low will jeopardize the impulsive integrity of the past month’s rally enough to come to this conclusion.  In the meantime and until/unless the market stems this rally with an even smaller-degree momentum failure, further and possibly accelerated gains should not surprise.  With virtually no levels of any technical merit above the market shy of May’s 7.66 high, the market’s upside potential is considered indeterminable and potentially steep.

We’ve noted the 6.80-area as the 1.8% retrace of May-Jul’s 7.66 – 5.62 decline in the daily log scale chart above (for what this “derived” level is worth; which is basically nothing in the absence of an accompanying confirmed bearish divergence in mo).  But this merely derived level is as good an “area of interest” as any above the market to beware the developing potential for the momentum failure needed to arrest this rally.  Until and unless such a mo failure materializes, traders should not underestimate the market’s upside potential.

These issues considered, a neutral-to-cautiously-bullish policy and exposure remain advised with a failure below 6.05 required to negate this call and warrant its cover and reversal into a cautious bearish stance.  In lieu of such weakness, further gains are expected.

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.