RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Fri’s recovery above 01-Jun’s 117.87 high and our mini risk parameter resulting from 02-Jun’s bearish divergence in short-term momentum rendered last week’s sell-off attempt as another 3-wave correction within the grinding recovery from 11-Apr’s 92.93 low.  This resumed rally leaves Thur’s 111.20 low in its wake as the latest smaller-degree corrective low this market is now required to sustain gains above to maintain a more immediate bullish count.  Per such as well as per the market’s encroachment on the upper-quarter of the past three months’ range, we’re defining this 111.20 low as our new mini risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase non-bearish decisions like short-covers and resumed bullish punts.

If we’re supposed to be long “up here” (and we are because at least the intermediate-term trend is up), then it is increasingly imperative for the bull to continue to BEHAVE LIKE ONE with sustained, trendy, impulsive and increasingly obvious behavior to the upside.  “Up here”, the market’s failure to do so via relapse below a level like 111.20 would threaten the impulsive integrity of such a bullish count and, by contrast, signal waning upside momentum consistent with what we believe might be a 5th-Wave diagonal triangle pattern up from 11-Apr’s 95.18 low close.  Until and unless the market fails below 111.20, further and possibly steep, accelerated gains should not surprise straight away and similar to the sharp gains of late in heating oil and RBOB.

The challenge to bull’s and a bullish policy “up here” is clear on a daily log high-low basis below where the market is “only” engaging the upper-quarter of the past three months’ range.  Given the obviously labored manner in which this market has struggled to go up since its 92.93 low on 11-Apr, it’s not hard to envision this recovery as a B- or 2nd-Wave corrective retest of 07-Mar’s 130.50 high.  If correct and following a momentum failure below a level like Thur’s 111.20 corrective low and certainly 19-May’s 103.24 corrective low, a sharp C- or 3rd-Wave to or through Mar/Apr’s 93.00-area lows and support would be expected.

If, alternatively, 11-Apr’s 92.93 low COMPLETED a major 4th-Wave correction and the secular bull trend is resuming, then, again, the bull would/should be expected to BEHAVE LIKE ONE with sustained, trendy, impulsive, ACCELERATING gains soon, settling the debate.



Another count may be considered however.  On a weekly close-only basis below, the market has closed above 04-Mar’s previous high weekly close at 115.68 the past two weeks, arguably reaffirming and reinstating the secular bull trend.  This fact belies the labored, grudging manner of the past TWO MONTHS’ rally that COULD be an indication of a “rising-wedge” 5th-Wave diagonal triangle labeled in the daily close-only chart above.  It has been our observation that such 2-steps-up-1-step-down rising-wedge patterns typically mean one of two things:

  1. waning momentum ahead of a reversal lower, or
  2. a sort of “coiling-up” before the trend goes ballistic.

As a result of Fri’s resumption of the 3-month recovery, we will gauge this market’s strength, or weakness/vulnerability around specific levels like 111.20 and especially 19-May’s 103.24 corrective low, a level this market should come nowhere near to if a broader 5th-Wave up from 11-Apr’s 92.93 low is unfolding.

These issues considered, a bullish policy and exposure are advised with a failure below 111.20 threatening this call enough to warrant moving to a neutral/sideline position.  In lieu of such weakness, further and possibly steep, accelerated gains straight away should not surprise.

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