RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Sep 16, 2022, 07:05 by Dave Toth

Today’s break below 07-Sep’s 101.19 low reaffirms the downtrend from 16-Aug’s 119.58 high and reinforces our bearish count introduced in 17-Aug’s Technical Webcast following that day’s bearish divergence in short-term momentum below 114.60.  This continued weakness leaves Mon’s 108.10 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to arrest this developing slide with a confirmed bullish divergence in short-term momentum and expose a (suspected 2nd-Wave) correction of the decline from last month’s 119.59 high.  In lieu of a recovery above at least 108.10, further and possibly accelerated losses should not surprise.  Per such, we’re identifying 108.10 as our new short-term risk parameter from which trades can objectively rebase and manage the risk of a recommended bearish policy and exposure.

The fact that the past month’s relapse has unfolded in a trendy, impulsive 5-wave manner is an important subset within the context of a major, multi-month peak/reversal process from 17-May’s 133.79 high in the Dec contract and that day’s 155.95 high in the then-prompt Jul contract on a weekly log active-continuation basis below.  This peak/reversal process remains predicated on:

  • 02-Jun’s bearish divergence in weekly momentum
  • the sheer extent and 5-wave impulsiveness of May-Jul’s INITIAL (A- or 1st-Wave) counter-trend decline
  • what has been and remains historically frothy levels in our RJO bullish Sentiment Index
  • a complete and massive 5-wave Elliott sequence from Apr’20’s 48.35 low to May’22’s 155.95 high
  • a 76.4% retrace of May-Jul’s 133.79 – 82.54 decline in the Dec contract (above) and a near 61.8% retrace of this decline on a weekly log active-continuation basis (below)
  • and “outside WEEK down” this week (higher high, lower low and lower close than last week’s range and close), and…
  • the market’s clear rejection of the upper-quarter of its historical range shown in the monthly log active-continuation chart below.

This remains a unique, compelling and extensive list of technical facts that warn of a peak/reversal environment that could be massive in scope.  Commensurately larger-degree weakness below 20-Jul’s 94.85 (possible 1st-Wave) high remains required to confirm Jul-Aug’s recovery attempt as a 3-wave and thus corrective affair, so there remains a (we believe) small chance that this bearish count is wrong.  But as stated above, a recovery above at least Mon’s 108.10 high is required to even defer this bearish count, et alone negate it, which would require a recovery above 16-Aug’s 119.59 high at this juncture.  Until and unless such strength is proven, and if this bearish count is correct, then we would expect a dramatic 3rd-Wave resumption of May-Jul’s downtrend to new lows below 15-Jul’s 82.54 low as part of a new major bear market that could span quarters.

These issues considered, a bearish policy and exposure remain advised with a recovery above 108.10 required to defer or threaten it enough to warrant taking profits and moving to a neutral/sideline position.  In lieu of such strength, further and possibly accelerated losses straight away remain expected.

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