RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Today’s resumed weakness below Mon’s 3.0955 low reaffirms the past three weeks’ slide from 16-Feb’s 3.2720 and leaves Tue’s 3.1780 high in its wake as the latest smaller-degree corrective high the market now needs to sustain losses below to maintain a more immediate bearish count. Its failure to do so will not only arrest this decline, but also contribute to a broader bullish count that contends this relapse is just a subset of the broader and lateral range between 28-Dec’s 3.3220 high and 09-Feb’s 3.0260 low that’s arguably merely a correction within the secular uptrend. Per such 3.1780 becomes our new short-term risk parameter from which a cautious bearish policy can be objectively based and managed.
The new short-term risk parameter will come in handy given the market’s encroachment on the lower-quarter of the past quarter’s range shown in the daily log chart above. Against the backdrop of the secular uptrend shown in the weekly log chart below and amidst a return to relatively lower bullish sentiment levels that have warned of and accompanied the ends of the last two bull market corrections, it’s not hard to envision another such correction’s end ahead of the resumption of the 2-YEAR bull.

This said and conversely, a break below 09-Feb’s 3.0260 low could alter the technical landscape drastically as a major PEAK/reversal threat would then be in place following that confirmed bearish divergence in WEEKLY momentum. In effect, we believe the market has identified 3.1780 and 3.0260 as pivotal directional triggers heading forward, the break of which could expose a steep move in that direction.
Contributing to what could be a monstrous peak/reversal environment are:

  • the prospectively complete 5-wave Elliott sequence from Jan’16’s 1.9355 low as labeled in the monthly log scale chart below
  • historically frothy levels in the Bullish Consensus (marketvane.net) measure of market sentiment not seen since 2006!
  • waning upside momentum and
  • the market’s rejection thus far of the exact (3.3267) 61.8% retrace of the entire secular bear market from Feb’11’s 4.65 high to Jan’16’s 1.9355 low.

A failure below 09-Feb’s 3.0260 low and key risk parameter could launch a correction or reversal lower that could span months or even quarters with a Fibonacci MINIMUM 38.2% retrace of the 1.9355 – 3.3220 rally not cutting across until the 2.70-area.

These issues considered, a cautious bearish policy remains advised for shorter-term traders with a recovery above 3.1780 required to threaten this call enough to warrant moving to a neutral/sideline position. Long-term players remain OK to maintain a cautious bullish policy with a failure below 3.0260 required to negate this call, warrant its cover and warrant a move to a cautious bearish position.


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