RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Aug 15, 2022, 07:21 by Dave Toth

The past week’s sharp, accelerated rally obviously reinforces our interim bullish count introduced in 27-Jul’s Trading Strategies Blog and leaves Fri’s 102.73 low in its wake as the latest smaller-degree corrective low this market is now minimally required to fail below to jeopardize the impulsive integrity of a more immediate bullish count.  Per such, we’re identifying 102.73 as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a continued, if interim bullish policy and exposure.

Stepping back, only a glance at the daily log chart of the Dec contract above is needed to see that the past month’s recovery is impressive and that the trend is obviously up.  And on a broader scale, a failure below 20-Jul’s 94.85 initial counter-trend high is required to negate the prospect of a 5-wave Elliott sequence up from 15-Jul’s 82.54 low and render this recovery the 3-wave and thus corrective affair we suspect it is.  We suspect this admittedly impressive recovery is just a (B- or 2nd-Wave) correction of May-Jul’s even more impressive decline from 133.79 to 82.54 because that decline looks to be a textbook 5-wave sequence.  Since the most basic of Elliott “theory” tenets is that corrections are not 5-wave structures, May-Jul’s decline is either the (1st-Wave) START of a major reversal lower that could span quarters or years OR the initial A-Wave of a larger-degree correction lower.  In both cases, this current recovery is considered a correction (either a B-Wave or a 2nd-Wave) within a major peak/correction/reversal process that is as massive in scope as 2020 – 2022’s secular bull trend was.

To negate this long-term bearish count, this market needs to take out the May highs.  But as there’s certainly a lotta green between spot and the May high- either 133.79 basis the Dec contract or 155.95 on an active-continuation basis below- a bullish policy and exposure remain advised until and unless a confirmed bearish divergence in momentum arrests the clear and present uptrend.  Herein lies the importance of the trailed bull risk parameters identified above.

Finally, we would remind traders of this market’s position within the middle-half bowels of its historical range on a monthly log scale basis below where the odds of aimless whipsaw risk are approached as high, warranting a more conservative approach to risk assumption.  A recovery-stemming bearish divergence in momentum will again leave this market vulnerable to potentially steep, if intra-range losses.  Until and unless such a mo failure stems this current uptrend, a bullish policy and longs recommended from the 94.00-area OB remain advised with a failure below 102.73 required for shorter-term traders to take profits and move to the sidelines and for even longer-term players to pare bullish exposure to more conservative levels.  In lieu of such weakness, further and possibly accelerated gains remain anticipated.

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