Posted on Mar 21, 2023, 01:13 by Dave Toth

We introduced the early rumblings of a potentially major peak/reversal threat in 13-Mar’s Technical Blog.  The extent and impulsiveness of subsequent weakness discussed in Thur’s Technical Blog reinforced this peak/reversal prospect.  Yesterday and today, the market’s break of 19-Jan’s 155.575 larger-degree corrective low confirms a bearish divergence in WEEKLY momentum that is the first such major momentum failure since May’22’s bearish divergence that only exposed a correction within the secular bull that still had miles to go.  THIS time however, this bearish divergence in weekly momentum stems from the extreme upper recesses of this market’s historical range shown in the monthly log chart above.  COMBINED with historically extreme sentiment/contrary opinion levels and this market working on an “outside MONTH down”, we believe a peak/reversal threat of major scope similar to 2014’s major top is underway until and unless negated by a recovery above 24-Feb’s 161.90 high.

This said however, and as is typically the case with such major peak/reversal-threat processes, the forces that have driven the mega-bull are unlikely to evaporate overnight, but rather over time.  During this “time”, reversal processes typically include an often times extensive (B- or 2nd-wave) corrective rebuttal to the initial (A- or 1st-wave) counter-trend decline.  Such a rebound is what we believe this market might be on the cusp of following the nicely developing potential for a bullish divergence in short-term momentum and a prospec5tively complete initial 5-wave Elliott sequence down from 24-Feb’s 161.90 high.

Before drilling down to a shorter-term time frame however, the combination of:

  • a confirmed bearish divergence in WEEKLY momentum from
  • the extreme upper recesses of this market’s historical range amidst
  • stratospheric sentiment/contrary opinion levels,
  • an arguably complete 5-wave diagonal triangle Elliott sequence from 31May22’s 150.875 low, and
  • an initial 5-wave impulsive counter-trend decline

is a unique and compelling confluence of technical facts and observations that defines 24-Feb’s 161.90 high as THE high and key long-term bear risk parameter this market has to recoup to mitigate this call for the end of the secular bull market and start of a new and major bear trend that could span quarters if not years.

On a shorter-term scale, the extent and impulsiveness of the past month’s decline is clear in the daily chart above and hourly chart below, where we’ve labeled the prospective complete 5-wave count down from 161.90.  This continued slide has left smaller-degree corrective highs in its wake at 157.025 and 157.50 that we are defining as our mini and short-term bear risk parameters this market needs to recoup to threaten and then confirm a bullish divergence in short-term momentum that we believe would complete the initial 5-wave sequence down from 161.90 and expose a potentially  extensive (B- or 2nd-Wave) correction of the decline from 161.90.  Until and unless this divergence is confirmed with a recovery above at least 157.025 and preferably 157.50, the trend is down and should not surprise by its continuance.  If/when such a divergence stems this decline, the subsequent and prospective recovery attempt to the 159-handle will be advised to first be approached as a corrective selling opportunity following a rebound-stemming bearish divergence in momentum.  If these conditions are met over the course of the next month or so, the risk/reward metrics of a new and major bearish policy could be one of the best opportunities across the entire commodities spectrum for 2023.

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