RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

In 24-Feb’s Technical Webcast we discussed admittedly shorter-term weakness in both cattle and hogs that could not be ignored as prospective starts to broader peak/reversal threats given ancillary longer-term evidence typical of such environments.  As discussed yesterday, the cattle market has since collapsed on a longer-term basis, confirming a major peak/reversal environment.  Today’s resumed slide below Mon’s 108.87 initial counter-trend low in Apr hogs confirms a bearish divergence in daily momentum and next reinforcing step in a broader peak/reversal threat that could be equally major in scope.

On a shorter-term basis detailed in the hourly chart below, today’s resumed slide leaves yesterday’s 107.45 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recover above to arrest the past week’s sell-off attempt as possibly expose it as another 3-wave and thus corrective affair within the secular bull trend.  Per such, this 107.45 level is considered our new short-term risk parameter from which new bearish exposure can be objectively based and managed.

On a broader basis, the daily log scale chart above shows today’s confirmed bearish divergence in daily momentum that defines 23-Feb’s 112.85 high clearly as one of developing importance and THE level this market is now required to recoup to mitigate a broader peak/reversal count and reinstate the bull.  Until and unless such strength is proven, the technical trifecta of peak/reversal environments is intact:

  1. a confirmed bearish divergence in momentum that breaks the uptrend
  2. accompanying extreme bullish sentiment/contrary opinion
  3. an arguably complete and major 5-wave Elliott sequence up from 28-Oct’s 78.10 low as labeled above.

If correct and given the extent and uninterrupted nature of Jan-Feb’s portion of the bull that left little in the way of former battlegrounds that can now be looked to as support candidates, the market’s downside potential is approached as indeterminable and potentially extreme.

Lastly and on an even broader scale, the monthly log chart below shows the market’s current foray into the upper-quarter of its historical range where it has spent scant time before collapsing.  This condition would seem to reinforce the peak/reversal elements cited above that, minimally, questions the risk/reward merits of maintaining a longer-term bullish policy “up here”.

These issues considered, not only are all previously advised bullish policy an exposure for longer-rem commercial players advised to be neutralize immediately, both short- and longer-term traders are advised to move to at least a cautious bearish policy and exposure at-the-market (101.20) with a recovery above 107.45 required for shorter-term traders to move to the sidelines and commensurately larger-degree strength above 112.85 for longer-term commercial players to follow suit.  In lieu of such strength, further and possibly steep losses straight away should not surprise.

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