RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Jan 03, 2023, 07:19 by Dave Toth

Overnight’s short-lived poke above 27-Dec’s 81.18 high and our mini bear risk parameter nullifies the bearish divergence in short-term momentum discussed in 29-Dec’s Technical Blog and resurrects the recovery attempt from 09-Dec’s 70.08 low.  This resumed intermediate-term uptrend leaves 29-Dec’s 76.79 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 pertinent to shorter-term traders with tighter risk profiles.  Its failure to do so will break this month’s uptrend and expose at least a more significant correction lower and possibly re-expose this year’s major bear trend.  Per such, this 76.79 level serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage non-bearish decisions like short-covers and cautious bullish punts.

From a longer-term perspective, the directional jury remains out as to whether Dec’s recovery attempt is just another interim correction within the major bear trend from the Jun highs OR the start of a more protracted correction or reversal of the entire Jun-Dec decline.  As the market has yet to even recoup 01-Dec’s 83.34 larger-degree corrective high needed to break even the portion of 2022’s major downtrend from 07-Nov’s 93.74 corrective high, let alone threaten the entire 43% drawdown, it remains premature to conclude a larger-degree correction or reversal higher.  Indeed, the weekly close-only chart below shows the market still below former 79.43-area support from late-Sep that, since broken in late-Nov, is considered new near-term resistance.  Per such, 01-Dec’s 83.34 larger-degree corrective high remains intact as our key long-term bear risk parameter pertinent to longer-term commercial players.  In effect, the short-term trend is up within the still-arguable long-term downtrend with 83.34 and 76.79 the key directional flexion points heading forward.

Per a broader bearish count and despite Jun-Dec’s $53, 43% decline, our RJO Bullish Sentiment Index remains at historically frothy levels around 84%, reflecting 232K Managed Money long positions reportable to the CFTC versus only 43K shorts.  This technical fact has been and remains a source of fuel for downside vulnerability until/unless mitigated by a recovery above at least our long-term bear risk parameter at 83.34.  An admittedly short-term relapse below 76.79 may once again leave this market vulnerable to sharp losses.

Finally and from an even longer-term perspective, the monthly chart below shows this market’s return to deep, deep within the middle-half bowels of its massive historical lateral range.  Such range-center conditions are fertile ground for aimless whipsaw risk, warranting a more conservative approach to risk assumption.  Herein lies the importance of identifying tighter but objective directional risk parameters at 83.34 and 76.79 AND the acknowledgement of and adherence to technical and trading SCALE commensurate with one’s own personal risk profile.

These issues considered, shorter-term traders are OK to approach this market from a neutral-to-cautiously-bullish stance with a failure below 76.79 required to negate this call and warrant its cover.  Longer-term commercial players remain advised to approach this market from a cautious bearish perspective with a recovery above 83.34 required to negate this call and warrant its cover.

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