Posted on Oct 24, 2023, 07:22 by Dave Toth

Yesterday’s break above 12-Oct’s 1.0669 initial counter-trend high reaffirms our interim base/correction count introduced in 11-Oct’s Technical Blog and leaves smaller-degree corrective lows in its wake at 1.0595 and 1.0523 that this market would be expected to sustain gains above IF a broader base/reversal environment is at hand.  These tighter but objective bull risk parameters will come in handy given the backdrop of the past quarter’s major downtrend and the fact that, thus far at least, the recovery from 03-Oct’s 1.0482 low is clearly only a 3-wave affair.

By taking our 12-Oct’s 1.0669 high, we know for a fact that the rally from 13-Oct’s 1.0523 low can be one of only two things:

  1. the completing c-Wave of a bear market correction, or
  2. the dramatic 3rd-Wave of a broader reversal higher.

The latter bullish count would be expected to be characterized by sustained, trendy and increasingly obvious behavior to the upside straight away.  A relapse below 1.0595 would threaten such a bullish count while further weakness below 1.0523 will negate it, confirm this month’s recovery attempt as a 3-wave and thus corrective event and re-expose the broader downtrend from 18-Jul’s 1.1311 high.

Despite a bullish divergence in daily momentum as a result of yesterday’s break above 12-Oct’s 1.0669 initial counter-trend high, reasons to remains suspect of this month’s recovery as anything other than a slightly larger-degree correction within the broader downtrend include:

  • the magnitude of Jul-Oct’s major downtrend and
  • fact that thus far this month’s recovery attempt has only managed to retrace a Fibonacci minimum 38.2% of the suspected 3rd-wave down from 10-Aug’s 1.1085 high to 03-Oct’s 1.0482 low.

To mitigate this bear market correction count and reinforce a broader base/reversal count, we believe this market needs to continue to rally in an increasingly obvious and impulsive manner and take out 20-Sep’s 1.0778 larger-degree corrective high that remains intact as our longer-term bear risk parameter pertinent to longer-term institutional players.

In effect, we have a situation where the short-to-intermediate-term trend is up within the still-arguable broader downtrend with the key directional flexion points and risk parameters identified at 1.0778, 1.0595 and 1.0523.  Traders are advised to toggle directional biases and exposure around these levels commensurate with their personal risk profiles.

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.