RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Oct 05, 2022, 10:21 by Dave Toth

Yesterday’s sharp relapse below last week’s 75.32 low and our mini risk parameter nullified Mon’s bullish divergence in very short-term momentum as a corrective whipsaw, reinstating our major peak/reversal count introduced in 18-Aug’s Technical Blog.  The hourly chart below details this resumed downtrend that shows yesterday’s 79.15 high as the latest smaller-degree corrective high and new short-term risk parameter this market is now required to recoup to confirm another bullish divergence in short-term mo needed to even defer the bear, et alone threaten it.  Per such, this 79.15 level serves as our new short-term risk parameter from which shorter-term traders can objectively rebase and manage the risk of a resumed bearish policy after getting whipsawed out on Mon’s minor bullish divergence in momentum.

On a broader scale, yesterday’s resumed downtrend reinforces a count calling the past couple weeks’ collapse the dramatic 3rd-Wave of a major (suspected 5-wave) reversal down from 16-Aug’s 91.35 low.  This count defines 25-Aug’s 81.52 low as the major 1st-Wave low that this market would now fully be expected to sustain losses below per any broader (5-wave) count down.  A recovery above 81.52 would jeopardize the impulsive integrity of this major bearish count enough for even longer-term commercial players to move to at least a neutral/sideline position if not a cautious bullish stance.  Per such, this 81.52 level serves as our new long-term bear risk parameter pertinent to longer-term commercial players.

Consistent with this broader bearish count is the still-frothy 70% reading in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC.  This sentiment/contrary opinion fact has been a critical element of our major peak/reversal count since 18-Aug’s bearish divergence in momentum arrested the bull and rendered contrary opinion an applicable technical tool.  Still bullishly skewed and especially INTO the teeth of a clear and present and major downtrend, this factor remains fuel for downside vulnerability and a reinforcing element to a bearish policy.

Finally, the monthly log active-continuation chart below shows that this market has maintained its proclivity for trading lower in the months following Jun/Jul, this year being the 14th year out of the past 15 that it has reversed lower.  However, this chart also shows the market’s reversion to the 80-to-90-area that capped this market as resistance from 2015 until last year’s upside breakout.  As with last year’s Jun-Sep relapse, we have to acknowledge this former key resistance area as a new support candidate.  A break below Sep’21’s 71.50 low may blow this candidacy away and leave the market prone to a return to the sub-55-handle-area lower-quarter of its historical range.  But the market’s return to the middle-half bowels of its historical range, where the odds of aimless whipsaw risk are considered higher, warrants a more conservative approach to risk assumption.  Herein lies the importance of our new bear risk parameters at 79.15 and especially 81.52.

These issues considered, a bearish policy remains advised for longer-term commercial players with a recovery above 79.15 required to pare exposure to more conservative levels and commensurately larger-degree strength above 81.52 to neutralize remaining exposure.  Shorter-term traders with tighter risk profiles whipsawed out of bearish exposure on Mon’s bullish divergence in short-term mo have been advised to return to a bearish stance on yesterday’s break below 75.23 with a recovery above 79.15 required to negate this call and warrant its cover.  In lieu of a recovery above at least 79.15, the trend is down on all scales and should not surprise by its continuance or acceleration straight away.

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