RJO FuturesCast

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Today’s break below last week’s 95.10 low reinforces our major peak/reversal-threat count introduced in 17-Jun’s Technical Webcast and leaves Fri’s 105.24 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to defer or threaten this bearish call.  Per such, we’re defining 105.24 as our new short-term risk parameter from which shorter-term traders can objectively base a continued or resumed bearish policy and exposure.

On both a daily log high-low basis above and log close-only basis below, the market is pressuring the pivotal lower boundary of the range that has constrained it for the past four months.  During this span, we’ve discussed the correction-vs-reversal debate, dilemma and challenge that commonly follows the end or interruption of a major uptrend.  Since mid-Jun, we’ve tilted towards the peak/reversal count for sentiment, momentum and wave reasons we’ll detail below.  But suffice it here to say that this market is on the brink of its next reinforcing evidence of a major peak/reversal count with a close below the 95.18 threshold defined by BOTH 11-Apr’s low close and 15-Mar’s low close and/or a break below 11-Apr’s 92.93 intra-day low.

Now even if the market breaks these obviously pivotal levels, the price action down from 07-Mar’s 130.50 intra-day high and/or 08-Jun’s 122.41 high daily close would still fall within the bounds of a major bull market correction given the magnitude of the 26-month secular bull trend.  BUT IF this is the case, and the decline from 29-Jun’s 114.05 intra-day high or 28-Jun’s 111.84 high close is the completing C-Wave to a massive bull market correction, then this market needs to bottom out in the immediate future and start proving sustained, trendy, impulsive behavior higher.  Because if the decline from that late-Jun high isn’t the completing c-Wave to a correction, it’s the dramatic 3rd-wave of a reversal lower that could start to produce steep, protracted, even relentless losses straight away.

Indeed, from a Fibonacci progression standpoint detailed below, the market is currently flirting with the (95.05) 1.000 progression of mid-Jun’s initial 122.41 – 104.03 decline taken from 28-Jun’s 111.84 high.  This is the area we would expect the market to contain the c-Wave of a bull market correction.  The 1.618 progression of mid-Jun’s initial decline doesn’t cut across until the 85.96-area.  If the decline from the late-Jun high is the dramatic 3rd-Wave of a major peak/reversal count, we would expect to see sustained, trendy, impulsive and increasingly obvious behavior south.  And as the equity markets have already forecast a major hiccup to the US and global economies, many other markets like nat gas, cotton, copper, silver, soybean oil, canola, wheat and lumber have seen massive reversals lower.  It is our technical opinion that until and unless arrested by a recovery above at least 105.24 and preferably 114.05, crude oil (and the rest of the energy complex) is the next major peak/reversal shoe to drop.

On an even broader basis, the weekly log close-only chart below shows the elements typical of a major peak/reversal-threat environment:

  • (on the verge of) a bearish divergence in WEEKLY momentum below 08-Apr’s 97.90 larger-degree corrective low close
  • historically frothy sentiment/contrary opinion levels
  • an arguably complete 5-wave Elliott sequence up from Aug’21’s 61.86 low
  • an arguably complete and massive 3-wave Elliott sequence up from Apr’20’s 17.18 low
    • where the suspected C-Wave from 61.86 spanned a virtually identical length 9i.e. 1.000 progression) to Apr’20 – Jun’21’s initial 17.18 – 75.19 rally

These issues considered, a bearish policy and exposure remain advised with a recovery above 105.24 required for shorter-term traders to move to the sidelines and for longer-term commercial players to pare exposure to more conservative levels.  In lieu of such strength, further and possibly steep, protracted losses should not surprise, especially following a close below 95.18 and/or an intra-day break below 92.93.

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