Posted on Mar 31, 2023, 07:41 by Dave Toth

In Mon morning’s Technical Blog we introduced the prospect for a more protracted correction or reversal higher than this market has seen for a while since melting down from last summer’s 123.68 orthodox high.  Recoveries, initially above 71.67 and subsequently the 72.50-area, have reinforced this basing structure and count.  Yesterday and today’s continued recovery, this time above Wed’s 74.37 high, leaves a smaller-degree corrective low in its wake at 72.61 from yesterday amidst the developing POTENTIAL for a bearish divergence in short-term momentum.

A failure below 72.61 is required to CONFIRM this divergence to the point of non-bullish action like long-covers for very short-term traders.  Until and unless such weakness is proven, at least the intermediate-term trend is up and should not surprise by its continuance or acceleration straight away.  Per such, this 72.61 level serves as our new mini bull risk parameter to go along with 24-Mar’s 66.82 corrective low and short-term risk parameter this market is required to break to render the past couple weeks’ recovery attempt a 3-wave and thus corrective affair that would then re-expose the secular bear.

While the past couple weeks’ recovery is not unimpressive, we want to consider tighter but objective bull risk parameters because of this market’s reversion to the middle-half bowels of the range that has constrained it for the past four months shown in the daily log chart below.  There’s a relative ton of former price action in this area and another round of aimless whipsaw risk from this area would hardly come as a surprise.  For shorter-term traders with tighter risk profiles, we will navigate this whipsaw risk precisely around 72.61.

From a long-term perspective, a recovery above 18-Jan’s 82.66 larger-degree corrective high and key long-term bear risk pertinent to long-term commercial players remains required.  82.66 is THE level this market needs to recoup to break the 9-month, $59.32, 48% decline from last Jun’s 123.68 orthodox high.

As discussed Mon, the plunge to a near-seven-year low of 61% in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC is an integral component of a base/correction/reversal count that could be extensive in terms of both price and time.  And the weekly close-only chart above also clearly shows a slowdown in the rate of descent over the past few months, creating the POTENTIAL for a bullish divergence in WEEKLY momentum.  Commensurately larger-degree strength above 20-Jan’s 81.69 corrective high weekly close and/or 18-Jan’s 82.66 intra-day high is required to CONFIRM this larger-degree divergence however and, in fact, break the 9-month downtrend.

Notable too is this market’s reversion to deep, deep within the middle-half bowels of its massive but lateral historical range shown in the monthly chart below.  Just like the market’s reversion to the middle of the past four months’ range cited above, this long-term range-center residence warns of greater odds of aimless whipsaw risk that warrants a more conservative approach to directional risk assumption.  And herein lies the importance of identifying tighter but objective risk parameters like those defined above.

These issues considered, a bullish policy remains advised for shorter-term traders with a failure below at least 72.61 required to pare or neutralize exposure.  Longer-term commercial players are advised to pare bearish exposure to even more conservative levels, with commensurately larger-degree strength above 82.66 required to negate a long-term bearish count altogether and warrant neutralizing any remaining exposure.

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