RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Sep 07, 2022, 07:46 by Dave Toth

Overnight’s break below 16-Aug’s 85.73 low and our short-term risk parameter reinstates and reaffirms what has become a 3-month downtrend from 08-Jun’s 122.41 high daily close.  While we already identified 30-Aug’s 97.66 high as our new long-term bear risk parameter following 30-Aug’s bearish divergence in momentum below 91.08 discussed in that day’s Technical Webcast, today’s break to a new low for the 3-month downtrend leaves Mon’s 90.39 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to confirm a bullish divergence in short-term momentum and threaten a more immediate bearish count.  Per such, this 90.39 level serves as our new short-term risk parameter from which shorter-term traders can objectively base non-bullish decisions like long-covers and resumed bearish punts.

Today’s intra-day weakness below 16-Aug’s 85.73 intra-day low validates last Fri’s daily close below 16-Aug’s 87.13 low close that reinstates the major downtrend from 08-Jun’s 122.41 high.  On this broader scale, 29-Aug’s 96.94 close (30-Aug’s 97.66 intra-day high) stands out as the latest larger-degree corrective high the market is now required to sustain losses below to maintain a broader and more immediate bearish count.  The current challenge is discerning the decline from those 29- and 30-Aug highs as the completing 5th-Wave of an Elliott sequence down from the early-Jun high or the dramatic 3rd-Wave of a more egregious decline straight away.

In our wave count labeled in the daily log close-only chart above, it’s easy to see the prospect that a 5-wave sequence down from 122.41 may be nearing its end.  And it may prove interesting that the decline from 28-Jun’s 111.84 high has spanned a length exactly 61.8% longer (i.e. 1.618 progression) than Jun’s initial 122.41 – 104.03 decline.  BUT until and unless this market starts proving strength by recovering above recent corrective highs like at least Mon’s smaller-degree corrective high at 90.39, the trend is down on all practical scales and should not surprise by its continuance or acceleration.

Indeed, longer-term traders are reminded that 1) this market is coming off a bearish divergence in WEEKLY momentum amidst 2) still-frothy levels in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC.  At a current 84% reading reflecting 214K long positions to just 41K shorts, plenty of fuel exists for downside vulnerability that, given today’s break to new 3-month lows, could be exacted straight away.

These issues considered, a bearish policy and exposure remain advised for longer-term commercial players with a recovery above 90.39 required to pare exposure to more conservative levels and further strength above 97.66 required to neutralize remaining exposure.  Shorter-term traders whipsawed out of bearish exposure following 19-Aug’s bullish divergence in short-term momentum are advised to return to a cautious bearish policy with a recovery above 90.39 required to negate this call and warrant its cover.  In lieu of a recovery above at least 90.39 and preferably 97.66, further and possibly accelerated losses should not surprise straight away.

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