RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

On the heels of mid-Jun’s obvious 3rd-wave-type portion of this month’s decline, this week’s relapse is consistent with a still-bearish count that contends last week’s recovery attempt from 19-Jun’s 82.94 low is a 3-wave and thus corrective event capped by Mon’s 86.22 high. Per such we are considering that 86.22 high as our new short-term risk parameter from which to rebase and manage the risk of a still-advised bearish policy.
Cotton Dec '18 240min Chart

Cotton Dec '18 Daily Chart

This tight but objective short-term risk parameter at 86.22 may com in handy given:

  • the developing potential for a bullish divergence in daily momentum above
  • the prospect that this week’s resumed slide is the completing 5th-wave of a 5-wave sequence down from 08-Jun’s 94.82 high and
  • the market’s proximity to the (82.47) 38.2% retrace of Jun’17 – Jun’18’s entire 65.80 – 94.82 rally on a weekly log scale basis below.

We would also remind traders that while this month’s decline has developed in a pretty obvious and impulsive manner, against the backdrop of 2017-18’s major bull trend this break may only be the INITIAL (A- or 1st-Wave) decline within a much broader peak/reversal-threat PROCESS that should not surprise by a potentially extensive (B- or 2nd-Wave) corrective rebuttal. Such a rebound would be first indicated by a recovery above 86.22. Such 86.22+ strength would provide traders the specific and objective opportunity to pare or neutralize bearish exposure and circumvent the heights unknown of such as a corrective rebound. Until and unless such 86.22+ strength is shown however, there’s no way to determine the scope the current downtrend.
Cotton Dec '18 Weekly Chart

Finally, on an even longer-term historical basis, the monthly log active-continuation chart below shows that this month’s relapse reinforces the importance of 97-handle-area that in Mar’14 defined the upper boundary of a lateral range that has encapsulated this market for six years. Combined with historically frothy bullish sentiment and the extent and impulsiveness of this month’s decline, 08-Jun’s 94.82 high in the now-prompt Dec contract and our long-term risk parameter may be around for long time.

These issues considered, a bearish policy remains advised with strength above 86.22 minimally required to defer or threaten this count enough to warrant paring or neutralizing bearish exposure commensurate with one’s personal risk profile. In lieu of such 86.22+ strength further and possibly accelerated losses remain expected.

Cotton Monthly Chart

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