RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Nov 22, 2022, 07:29 by Dave Toth

Yesterday’s continued recovery, above 26-Oct’s 333.25 low, former support-turned-resistance and our short-term bear risk parameter reinforces our intra-range base/correction/recovery count introduced in 17-Nov’s Technical Blog following that day’s bullish divergence in very short-term momentum from the lower-quarter of the past 3-month range.  The hourly chart below shows this continued recovery leaving smaller-degree corrective lows in its wake at 324.00 and 314.75 that we’d now expect the market to sustain gains above per a count calling for the continuation of a much broader bear market correction that dates from 18-Aug’s 301.25 low.  Per such, these levels serve as our new mini and short-term risk parameters from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

On a broader scale, the daily log chart below shows the market’s return to the middle-half bowels of the correction/consolidation range that began with 18-Aug’s 301.25 low and end to a textbook 5-wave Elliott sequence down from 17-May’s 437.50 high.  That 301.25 low is the obvious low and support this market ultimately needs to break to resurrect our major peak/reversal count from May’s all-time high.  Until and unless such weakness is shown, the market remains arguably in a major correction to and consolidation of May-Aug’s suspected 1st-Wave decline.

Navigating corrective/consolidative environments is always a challenge due to the many aimless forms it can take.  Trying to sub-divide waves WITHIN such an environment is futile and ill-advised (unless you’re looking for tax losses to offset major profits from your short bitcoin position this year).  Under such whippy, choppy circumstances, we recommend a “trading range approach” whereby you avoid initiating directional exposure from the middle-half of the range where the odds of aimless whipsaw risk present poor risk/reward metrics.  Additionally, we look for a bullish divergence in short-term momentum from the lower-quarter of the range for a cautious bullish policy and, conversely, a bearish divergence in short-term mo from the upper-quarter of the range to take a cautious punt from the bear side.

From an Elliott Wave perspective (for what this is worth under these conditions), we “suspect” that this market might now be in a sharper c-Wave continuation of the broader correction from Aug’s 301.25 low.  If correct, this would suggest a relatively sharp, impulsive rally to and possibly through 10-Oct’s 365.00 high.  Combined with last week’s bullish divergence in short-term mo from the lower-quarter of the 3-month range that, most importantly, identifies specific lows and bull risk parameters at 324.00 and 314.75, a favorable risk/reward opportunity exists from the bull side.  A relapse below 324.00 will be the first strike against this interim bullish call.  A failure below 314.74 will be strike two.  And needless to say, further weakness below 18-Aug’s 301.25 low will not only be strike three to the interim bull, but also will reinstate this year’s major reversal and new secular bear trend.

These issues considered, an interim bullish policy and exposure remain advised with a failure below 324.00 threatening this call and subsequent weakness below 314.75 negating it, warranting a return to a neutral/sideline position.  In lieu of such weakness, further and possibly accelerated, if intra-range gains are anticipated.

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