RJO FuturesCast

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While yesterday’s break above 24-Feb’s 1691.7 high reinstated the secular bull trend that started over FOUR YEARS ago, it’s not hard to find technical elements that suggest this rally may be nearing an end that could be major in scope.  The extent and impulsiveness of the past week’s rally certainly identifies 28-Feb’s 1564.7 low as the latest larger-degree corrective low and key risk parameter this market is required to break to confirm a bearish divergence in momentum of a sufficient scale to break the major bull.  But on a smaller scale shown in the 240-min chart below, yesterday’s poke to a new high leaves Fri’s 1642.4 low in its wake as the latest smaller-degree corrective low but, we believe, a key risk parameter.

A failure below 1642.4 will not only confirm a bearish divergence in short-term mo, but also complete a 5-wave Elliott sequence from 28-Feb’s 1564 low to yesterday’s 1704.3 high.  Such a sub-1642.4 mo failure will define yesterday’s 1704.3 high as the end of at least the rally from 1564, but, for reasons detailed below, possibly the end of a major wave sequence from not only 12-Nov’s 1446 low, but possibly a 5-wave sequence that dates from Aug’18’s 1167 low!

As always, we cannot conclude a major peak/reversal count from proof of just smaller-degree weakness below a minor corrective low like 1642.4.  Indeed, only a glance at the daily (above) and weekly (below) charts is needed to see that commensurately larger-degree weakness below 28-=Feb’s 1564 next larger-degree corrective low is needed to confirm a bearish divergence in daily momentum to, in fact, break the major uptrend.  per such, this 1564 level remains intact as our key long-term risk parameter.

HOWEVER…the following factors are compelling and, if correct, warn of a peak/reversal threat that could be imminent and major:

  • the prospect that the past week’s rally from 28-Feb’s 1564 low is the COMPLETING 5th-Wave of a sequence from 12Nov19’s 1446.2 low
  • the even broader prospect that the rally from Nov’s 1446.2 low is the COMPLETING 5th-Wave of a huge Elliott sequence from Aug’18’s 1167 low with
    • the length of this 5th-Wave only 12-bucks beyond the (1692) 0.618 progression of the net distance of Waves-1-thru-3 (1167 – 1566)
  • historically frothy market sentiment/contrary opinion levels not seen in at least 2-1/2 years and, in the case of the bullish Consensus (marketvane.net), since that that warned of and accompanied 2011’s all-time highs at 1920.

The monthly log chart below shows the magnitude of the secular bull market.  As the trend remains arguably up on all scales, there are NO levels of any technical merit above the market.  In effect, there is no resistance.  Virtually all of the technical levels of merit currently exist only BELOW the market in the form of prior corrective lows like 1564 and even an admittedly tight low like 1642.4.  However, we have listed a number of factors that we believe warn a high of potentially major proportions may be near.

These issues considered, a bullish policy remains advised, with a failure below 1642.4 required for shorter-term traders to move to a neutral/sideline position and longer-term players to pare exposure to more conservative levels.  If/when the market fails below 1642.4, we’ll have to wait to see HOW (i.e. impulsively or in a labored, corrective manner) and its depth.  A trendier, impulsive and steeper setback would be the next reinforcing component of a peak/reversal threat that could be major in scope and that would set the stage for approaching any subsequent recovery attempt as a corrective selling opportunity that could prove to be one of the key trade opportunities of 2020.  Needless to say, a recovery above 1704.3 mitigates any peak/reversal threat, reaffirms the bull and could produce steep gains thereafter.

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