RJO FuturesCast

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We introduced the prospect for a larger-degree peak/correction/reversal count in 06-May’s Technical Blog following that day’s bearish divergence in admittedly short-term momentum.  This market’s weakening, vulnerable development took another step with 19-May’s relapse below 10-May’s 142.10 initial counter-trend low, with the past few days’ clear break below an area of support around 141.12-to-142.10 providing the latest reinforcing evidence of weakness.  While 17-May’s 151.95 corrective high remains intact as a short-term but key bear risk parameter this market needs to recoup to render the broader sell-off attempt from 04-May’s 155.95 high another 3-wave and thus corrective structure that would then re-expose the secular bull, this week’s continued slide leaves yesterday’s 142.00 high in its wake as a very minor corrective high from which shorter-term traders can objectively rebase and manage the risk of non-bullish decisions like long-covers and new bearish punts.  Per such, we’re defining 142.00 as our new mini bear risk parameter ahead of further and possibly steep losses straight away.

Taking a step back, the interesting and opportunistic factor is that the decline from 17-May’s 151.95 high is either the completing C-Wave of another BULL market correction OR the dramatic 3rd-Wave of a broader reversal lower.  Always biasing WITH a trend, traders are advised to first approach this market from the 3rd-wave-down perspective because 1) it would be expected to produce sharp, sustained losses straight away and 2) the market has defined specific corrective highs and risk parameters at 151.95 and even 142.00 from which the risk of such a policy and exposure can be objectively based and managed.

IF the decline from 151.95 is a 3rd-Wave, this market would be expected to pretty much fall apart straight away, with a break of 25-Apr’s 132.33 larger-degree corrective low and key long-term risk parameter confirming a bearish divergence in WEEKLY momentum.  Such a sub-132.33 failure would allow us the confirm 04-May’s 155.95 high as the end of AT LEAST a 5-wave Elliott sequence from 08-Mar’s 112.07 low and possibly the end of the secular 25-MONTH bull market from Apr’20’s 48.35 low (discussed below).

To be sure and against the backdrop of the secular bull trend, the past four weeks’ sell-off attempt thus far still falls well within the bounds of another bull market correction.  But per the peak/reversal-threat elements discussed above, we believe this market is at a pivotal area and condition that could melt down any time and confirm a broader peak/reversal.

Contributing to this peak/reversal threat that could be major in scope is the fact that market sentiment/contrary opinion has, understandably, been at historically bullish/frothy extremes for months.  This condition is typical of major peak/reversal environments.  One more larger-degree spate of weakness below 132.33 would all but guaranty a peak/reversal count that could expose protracted losses for weeks, months or even quarters.

These issues considered, shorter-term traders remain advised to maintain a bearish policy and exposure with recovery above 142.00 and/or 151.95 required to pare/neutralize exposure.  Longer-term commercial players are OK to maintain a cautious bullish stance with a failure below 132.33 required to negate this call, warrant its immediate cover and reversal into a new short position.  Commercial players also have the option of moving to a new bearish policy at current 137.62-area levels and acknowledge and accept whipsaw risk, back above 142.00 and/or 151.95, in exchange for deeper nominal risk below 132.33.

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