RJO FuturesCast

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In 02-Jan’s Technical Blog we introduced the 3.55-area as the first threshold the market needed to recover above to not only break the downtrend from 04-Dec’s key 3.61 high, but also raise the odds that the entire 6-MONTH bear trend from 11Jul17’s 4.26 high may be over. After subsequent updates extolling the favorable risk/reward benefits of some cautious bullish option strategies, this morning’s poke above that 3.55 short-term risk parameter and the past MONTH’S resistance CONFIRMS a bullish divergence in momentum and defines 12-Jan’s 3.45 low as one of developing importance and our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.


The daily log scale chart above shows the bullish divergence in the rate-of-change measure of momentum that legitimizes 12-Jan’s 3.45 low as a more reliable, market-defined low from which non-bearish decisions can be objectively based and managed. This chart also shows the market still below a more pivotal and larger-degree former support area between 3.57-and-3.61 that, since broken, is now considered a key new resistance candidate on a broader scale. Specifically, we have identified 04-Dec’s 3.61 larger-degree corrective high as THE KEY risk parameter and gateway to what we believe will be a major base/reversal-threat environment.

Proof of commensurately larger-degree strength above 3.61 will break the major downtrend from last Jul’s 4.26 high. And given historically bearish sentiment typical of major base/reversal environments and the market’s continued rejection of the lower-quarter of a 3-YEAR range, even such relatively minor strength above 3.61 cannot be ignored as an event that exposes extensive upside vulnerability.
The monthly log scale chart above shows the past three years’ “non-trending” behavior circled in blue. If a market isn’t trending, its only other two possibilities are consolidation (within the previous trend) or reversal. It has been our contention 4Q16 that a major reversal environment is at hand similar to that that began with Dec’08’s 3.05 low.

We obviously cannot conclude a reversal based on such minor scale strength as the market indicated today with its poke above 3.55. But it cannot be ignored as a possibility. Continued and commensurately larger-degree strength above 3.61 would be the next bullish move in the chess match. And beyond 3.16- especially given the extent to which the huddled masses are bearish- the market’s upside potential could be extraordinary and should not be underestimated. The risk/reward opportunity that this condition presents could be outstanding given the confluence of:

  • what would be a bullish divergence in mo above 3.61
  • a complete 5-wave Elliott sequence down from last Jul’s high
  • historically bearish sentiment
  • the market’s continued rejection of the lower-quarter of the 3-YEAR range and
  • the Fibonacci fact (shown in the quarterly log chart below) that Jul’16’s 3.15 low rendered the decline from Jun’12’s 8.49 all-time high the EXACT same length (i.e. 1.000 progression) as BOTH the 2008-09 AND 1996 – 2000 preceding bear markets. (This Fibonacci relationship continues to astound us, especially since the exact same relationships have been observed with respect to the secular bear trend in soybeans from 2012’s 17.89 high).

These issues considered, shorter-term traders have been advised to neutralize all previously recommended bearish exposure and are further advised to establish cautious bullish exposure from 3.55 OB with a failure below 3.45 required to nullify this call and warrant its cover. Longer-term players are advised to pare bearish exposure to more conservative levels and required further proof of strength above 3.61 to jettison the balance of this position altogether and establish a new bullish policy and exposure. In effect, we believe the market has identified the 16-cent range of 3.45 and 3.61 as a hugely pivotal one around which directional biases and exposure can be effectively toggled in attempt to navigate what we believe is a unique and compelling technical setup with outstanding trade opportunity. Stay tuned. This is gonna get interesting-er.


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