RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

In 06-Dec’s Technical Blog we introduced factors warning of a developing base/reversal threat.  These factors include:

  • a bullish divergence in daily momentum
  • the market’s proximity to the extreme lower recesses of this year’s range amidst
  • historically bearish sentiment levels

and are shown in the hourly chart above and daily log chart below.

After a confirmed bullish divergence in momentum and proof of trendy, impulsive behavior UP in the direction of the suspected new trend, we look for proof of labored, 3-wave, corrective behavior as the third of our three reversal requirements.  As a result of today’s nondescript rebound that shows at least some kind of rejection thus far of 02-Dec’s 65.40 low left in the wake of last week’s bullish divergence in momentum, we believe the market has thus far satisfied this third requirement and reinforces that 65.40 low as one of developing importance and a specific, reliable risk parameter from which a bullish punt can be objectively based and managed.

To be sure, this market has NOT YET provided enough upside behavior to negate the ultimately bearish count that would contend that the past couple weeks’ mere lateral chop is just a consolidative (4th-Wave) correction ahead of a resumption of the broader downtrend from Oct’s 79.52 high.  But in such an event, that 65.40 risk parameter will stem losses.  If our preferred base/reversal count is correct, the risk/reward merits of a bullish count from current 67.92-area prices is very favorable indeed to what we believe will be levels back to the upper-half or even upper-quarter of the past 4-month range.

The weekly log chart of the Feb contract above shows not only its position at the lower-quarter of this year’s range, but historically bearish sentiment/contrary opinion levels that have warned of and accompanied significant, if intra-range rebounds in the past.  On an active continuation basis below, the market’s position deep in the middle-half bowels of this market’s multi-year lateral range maintains the odds for aimless whipsaw risk that warrants a more conservative approach to risk assumption.  And since we’ve identified a tight but objective bull risk parameter at 65.40, we are adhering to such a conservative policy.

These issues considered, traders are advised to establish a bullish policy and exposure at-the-market (67.82 OB) with a failure below 65.40 required to negate this call and warrant its cover ahead of further and possibly sharp losses.  Subsequent proof of strength above last week’s 70.05 initial counter-trend high will confirm this cal and expose accelerated gains thereafter.

JUN HOGS

The technical construct and expectations for the Jun contract are virtually identical to those detailed above and warrant a cautious bullish policy from 86.35 OB with a failure below 83.92 required to negate this call and warrant its immediate cover.  Subsequent gains above 87.57 will confirm this call and expose further and possibly accelerated gains thereafter.

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