RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

In yesterday’s Technical Blog we introduced Fri’s minute corrective high as an extraordinarily tight risk parameter the market needed to sustain recent losses below to avoid confirming a bullish divergence in very short-term momentum. The 240-min chart below shows that the market has recouped this level that confirms the bullish divergence in momentum and defines yesterday’s 1281.2 low as one of developing importance and the END of at least the decline from 11-May’s 1326.3 high. In this regard yesterday’s 1281.2 low becomes our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

With the market still below a ton of the price action down from 11-Apr’s 1369.4 high in general and below key former 1302-to-1305-area support-turned-resistance in particular, it’d be foolish to conclude a more significant recovery in the days or weeks ahead as opposed to an interim corrective hiccup to the 1302/05-area before a resumption of the broader slide. HOWEVER, the very real prospect exists that yesterday’s 1281.2 low COMPLETED a 5-wave Elliott sequence down from 11-Apr’s 1369.4 high, even a Fibonacci minimum 38.2% retracement of which would mean a return to the 1315-area.
Gold 240min Chart
Gold Daily Chart
Contributing to this rebound conspiracy are the following factors:

  • the developing potential for a bullish divergence in daily momentum (above)
  • the erosion in our RJO Bullish Sentiment Index to levels that have warned of and accompanied the ends of both prior major corrections over the past 17 months
  • the market’s proximity to the (1286.9) 61.8% retrace of Dec-Apr’s 1241.7 – 1360 rally on a daily close-only basis above
  • yesterday’s proximity to the (1275.8) 38.2% retrace of the entire Dec’16 – Apr’18 rally from 1124.3 to 1369.4 on a weekly basis below amidst a
  • still arguable secular bull trend.

All of these base/reversal-conspiracy elements will be nullified on a failure below 1281.2 that will reinstate at least the intermediate-term downtrend and expose potentially steep losses thereafter. In lieu of such however and ahead of even more reinforcing base/reversal evidence above 1305-area resistance, traders are advised to acknowledge the developing potential for what would be an acute risk/reward buying opportunity from the current 1293-area with protective sell-stops below 1281.2. Longer-term players remain OK to maintain a bearish policy with strength above 1305 required to pare exposure to more conservative levels and subsequent strength above 1326.3 required to jettison the position altogether. This bullish call on gold also fits well with our earlier call this morning for a prospective rebound in the Euro given the relative inverse correlation between gold and USD.

Gold Weekly Chart

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