Posted on Nov 28, 2023, 07:09 by Dave Toth

Yesterday’s break below 13-Nov’s 4.76 low in the now-prompt Mar24 contract reaffirms and reinstates the secular bear market and leaves smaller- and larger-degree corrective highs in its wake at 4.96 and 5.22, respectively, that this market must now recoup to even defer, let alone threaten a bearish count.  Per such, these levels serve as our new short- and longer-term parameters from which a still-advised bearish policy and exposure can be objectively rebased and managed by short- and longer-term traders.

Former 4.76-to-4.82-area support over the past two months now serves as a new near-term resistance candidate.

The weekly chart of the Mar24 contract below shows the magnitude of the massive reversal into a new secular bear market from Apr’22’s 6.84 high.  The trend is down on all scales and should hardly surprise by its continuance or acceleration straight away.

This chart also shows the developing POTENTIAL for a bullish divergence in momentum amidst historically bearish levels of market sentiment/contrary opinion typical of major BASE/reversal environments.  HOWEVER, traders are reminded that sentiment/contrary opinion is not an applicable technical tool in the absence of an accompanying CONFIRMNED bullish divergence in momentum of a scale sufficient to threaten the major trend.  Herein lies the crucial importance of corrective highs like 5.22 and even 4.96.  Until/unless such strength is proven, momentum and contrary opinion elements are otherwise not applicable.

Lastly and on an even longer-term basis, the monthly log active-continuation chart below shows the major multi-quarter reversal of Apr’20 – Apr’22’s secular bull market into the current secular bear market that we’ve likened to that that followed 2012’s major top.  While we cannot ignore the middle-half bowels of this market’s massive but lateral historical range as a reason to beware aimless whipsaw risk typical of such range-center environs, this major bear trend’s continuance should hardly come as a surprise with the lower-quarter of this historical range below 4.00 a source of prospective support and area to be watchful for the inevitable slowdown of this secular bear similar to 2014 and the years that followed.

These issues considered, an aggressive bearish policy and exposure remain advised with a recovery above 4.96 sufficient for shorter-term traders to move to the sidelines and commensurately larger-degree strength above 5.22 for longer-term commercial players to follow suit.  In lieu of such strength, further and possibly accelerated losses to the 4.00-area and below in the months/quarters ahead should not surprise.

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.