RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Oct 19, 2022, 07:30 by Dave Toth

Overnight’s break below 07-Oct’s 81.55 low reaffirms and reinstates our major bearish count and leaves 11-Oct’s 89.78 high in its wake as the latest corrective high this market is now required to recover above to confirm a bullish divergence in momentum, break the downtrend from 16-Aug’s 119.59 high and expose a correction of the Aug-Oct decline that could be relatively protracted.  Until and unless such 89.78+ strength is proven, the trend is down on all scales and should not surprise by its continuance or acceleration straight away.  Per such, this 89.78 level serves as our new key parameter from which the risk of a still-advised bearish policy and exposure can be objectively rebased and managed.

In the daily log chart below, it’s easy to see the prospect that the past week’s decline could be the completing wave of a 5-wave sequence down from 16-Aug’s 119.59 high.  However, a recovery above 89.78 is required to CONFIRM such a count and expose a corrective recovery that we believe would be worth avoiding by covering shorts.  Again, until and unless such specific strength is proven, and especially given new lows for THIS YEAR in the major reversal of 2020 – 2022’s secular bull trend, there’s no way to know how low “low” is.

Indeed, the weekly log chart above shows this week’s resumption of the YEAR’S major downtrend and reversal of 2020 – 2022’s entire rally from 48.35 to 155.95.  Today’s break below 07-Oct’s 81.55 low exposes a vast area totally devoid of any technical levels of merit shy of Apr’20’s 48.35 low.  This does not mean we’re forecasting a move to 48.35.  But it certainly does mean that until and unless arrested by a recovery above 89.78 specifically and objectively, the market’s downside potential is indeterminable and potentially extreme, including a run at the 2020 low.

If there’s a prospective fly in the bearish ointment, it’s the fact shown in the monthly log chart below that the market has reverted to deep within the middle-half bowels of its 13-YEAR historical lateral range where we always approach the odds of aimless whipsaw risk as higher, warranting a more conservative approach to risk assumption.  Herein lies the importance of a relatively tight but very important corrective high and risk parameter at 89.78, the recovery above which will confirm a bullish divergence in daily momentum and expose an interim correction higher.

These issues considered, a bearish policy and exposure remain advised with a recovery above 89.78 deferring or threatening this call enough to warrant moving to a neutral/sideline position.  In lieu of such strength, further and possibly accelerated losses remain anticipated.

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