RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Eurodollar Setback Continues, Defines New S-T Bear Risk

Yesterday’s clear break below the past week’s 96.72-area support reaffirms our peak/reversal count introduced in 07-Jul’s Technical Blog that reinforces 06-Jul’s 97.225 high as one of importance and Fri’s 96.92 high as the latest smaller-degree corrective high.  It remains indeterminable at this juncture whether the past couple weeks’ relapse is just a B- or 2nd-Wave corrective rebuttal to Jun-Jul’s (A- or 1st-Wave) rally from 95.97 to 97.225 within a broader BASE/correction/reversal count OR the 5th-Wave resumption of the secular bear market.  BUT IF 06-Jul’s 97.225 completed a major 4th-Wave correction and the bearish 5th-Wave-down count is unfolding, it is imperative for this market to BEHAVE LIKE A BEAR at this juncture by sustaining trendy, impulsive behavior lower and NOT recovering above levels like 96.92 and certainly 97.225.  Per such, 96.92 and 97.225 are considered our new mini and short-term risk parameters from which a cautious bearish policy and exposure can be objectively rebased and managed.

From a longer-term perspective, this market has produced some conflicting technical facts that remind us of the importance of technical and trading SCALE.  The daily chart (above) shows the market confirming a bearish divergence in momentum that defines 06-Jul’s 97.225 high as the END of the recovery from 13-Jun’s 95.997 low.  Combined with an “outside day down” that day and the Fibonacci fact that that high was just a basis point away from the (97.215) 38.2% retrace of the suspected and massive 3rd-Wave plunge from Aug’21’s 99.23 high to 13-Jun’s 95.97 low, it’s not hard to envision that 97.225 high as the end of a prospective and major 4th-Wave correction ahead of an eventual major 5th-Wave resumption of the secular bear trend to new lows below 95.97.

Conversely, early-Jul’s recovery above 26-May’s 97.105 corrective high confirms a bullish divergence in WEEKLY momentum.  Combined with a recent 28% reading in the Bullish Consensus (marketvane.net) measure of market sentiment, its lowest level in FOUR YEARS, it’s equally easy to see the prospect of a larger-degree correction or reversal higher in which Jun-Jul’s rally is just the initial A- or 1st-Wave and the current relapse is a B- or 2nd-Wave correction.  If this latter, bullish count is correct, this market would be required to arrest this current relapse with a countering bullish divergence in momentum from a level above 95.97.  Recent corrective highs like 96.92 and certainly 97.225 are levels that, if recouped, would be consistent with this larger-degree base/correction/reversal count.

These issues considered, a cautious bearish policy and exposure remain advised with a recovery above 96.92 threatening this call and further strength above 97.225 negating it, reaffirming a broader base/correction/reversal count and exposing potentially sharp gains thereafter.  In lieu of a recovery above at least 96.92, further and possibly accelerated losses are anticipated.

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.