RJO FuturesCast

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The market’s failure overnight to sustain recent losses below 29-Sep’s 1.1833 corrective high and short-term risk parameter stems the recent decline at 1.1669 and identifies that low as the obvious short-term risk parameter the market is now required to break to reinstate the decline and reinforce a peak/reversal count that we believe could be major in scope.  At this juncture it is indeterminable whether the past month’s sell-off attempt from 08-Sep’s 1.2092 high is a complete 3-wave and thus corrective structure ahead of a resumption of 2017’s major uptrend OR the early stages of a peak/reversal count that suggests the current rebound is another corrective selling opportunity ahead of further and potentially significant, multi-month losses.

Euro 240 min Chart


Euro Daily Chart

Given the magnitude of this year’s major uptrend shown in the daily (above) and weekly (below) log scale charts, the past month’s sell-off attempt falls well easily within the bounds of a BULL market correction.  This is what makes today’s bullish divergence in momentum so important.  Until the market relapse below 1.1669, we could see an impulsive 5th-Wave resumption of the bull straight away and to new highs above 1.2092.  If, alternatively, 08-Sep’s 1.2092 high did, in fact, complete the 5-wave sequence from Jan’s 1.0341 low as labeled, then by definition this current pop would be expected to peter out somewhere shy of 20-Sep’s 1.2034 high via a countering, confirmed bearish divergence in short-term mo, perhaps even around today’s 1.1846 high and the (1.1851) 50% retrace of the decline from 20-Sep’s 1.2034 high to Fri’s 1.1669 low detailed in the 240-min chart (top).

There’s a lot of “if-then” stuff going on currently, but this is the nature of the beast when trying to negotiate the typical correction-vs-reversal dilemma.

Euro Weekly Chart



We would remind traders of the very long-term reasons we’re concerned about an interim but major peak/reversal environment:

  • the market’s proximity to HUGE former support from the 1.20-area that, since broken in Jan’15, serves as a new major resistance candidate
  • this fact is reinforced by the (1.2029) 50% retrace of the decline from May’14’s 1.3993 high to Jan’17’s 1.0341 low
  • a confirmed bearish divergence in momentum that identifies 08-Sep’s 1.2092 high as one of developing importance and potentially the end of a
  • complete 5-wave Elliott sequence from Jan’s 1.0341 low to 08-Sep’s 1.2092 high amidst
  • frothy sentiment levels not seen since those that warned of and accompanied the 2014-15 collapse.

From an even longer-term perspective, we believe this year’s rally is just the initial (A- or 1st-Wave) rally in a huge, multi-year base/reversal count to levels well above 1.20.  But given that 2017’s rally would be just the initial rally in such an environment, the thing that’s still missing is a typically extensive (B- or 2nd-Wave) correction lower within the major base/reversal PROCESS that’s trying to reverse a secular 8-1/2-year bear.  The fundamental and technical forces that drove that bear for so long just don’t evaporate in a few quarters, but rather take TIME to change.  This is, fundamentally, what technical 2nd-waves and right-shoulders are all about.  And until this market recoups 08-Sep’s 1.2092 high, it is such a B- or 2nd-Wabe correction lower that we believe could drive prices to the 1.12-to-1.10-range over the course of the next 3-to-5-months.

These issues considered, shorter-term traders have been advised to move to a neutral/sideline position following today’s recovery above 1.1833.  Longer-term players are OK to pare bearish exposure to more conservative levels, with commensurately larger-degree strength above 1.2092 required to negate this peak/reversal call altogether and warrant its complete cover.  We will be watchful for a bearish divergence in short-term momentum in the days immediately ahead that would tilt the short-term directional scales lower and perhaps resurrect the broader bearish count.

Euro Monthly Chart

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