Softs

Cotton Peak/Reversal Count Takes First Baby Step

Posted 12/02/2020 8:28AM CTRJO Market Insights

In yesterday’s Technical Webcast we discussed shoring up short-term bull risk to 24-Nov’s 71.85 low, as its break would render it an initial counter-trend low and confirm a bearish divergence in short-term momentum.  The 240-min chart below shows the market’s break of this level and a key area of former resistance-turned-support overnight that defines 23-Nov’s 74.27 high as one of developing importance and POSSIBLY the end of a major 5-wave Elliott sequence hat dates from 02-Apr’s 51.64 low.  Per such, 23-Nov’s 74.27 low is considered our new short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.  Fri’s 73.50 corrective high serves as an even tighter micro risk parameter from which short-term traders can base and manage the risk of a bearish play.

This admittedly short-term weakness could have long-term implications as ancillary evidence warns of a peak/reversal threat that could be major in scope.  This evidence includes:

  • The prospect that the rally from 02-Ar’s 51.64 low is a complete 5-wave Elliott sequence as labeled above
  • Waning upside momentum on both a daily and weekly basis
    • Confirmed on commensurately larger-degree weakness below 02-Nov’s 68.91 next larger-degree corrective low and key risk parameter
  • Historically frothy levels in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC
  • The market’s proximity to and thus far rejection of 13Jan20’s 73.00 high.

As is typically the case, we cannot conclude a broader peak/reversal count from proof of just short-term weakness like today’s below 71.85.  But we absolutely can conclude 23-Nov’s 74.27 high as objective risk parameter from which non-bullish decisions can be objectively based and managed.

These issues considered, shorter-term traders have been advised to neutralize all bullish exposure and are further advised to establish a cautious bearish policy and exposure from 71.50 OB with a recovery above 27-Nov’s 73.50 micro corrective high and risk parameter required to negate this specific call and warrant it cover.  Long-term players have been advised to pare bullish exposure to more conservative levels and are further advised to neutralize remaining exposure on a failure below 68.91 AND also roll into at least a cautious bearish policy at that point.

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