RJO FuturesCast

Daily Futures Market News, Commentary, & Insight


In Tue’s Technical Blog we discussed that day’s momentum failure below 08-Apr’s 1670.7 corrective low warning of a more protracted correction or reversal lower, but also stipulated that that slide needed to sustain losses below a smaller-degree corrective high at 1718.4 from Mon.  The market’s failure to sustain sub-1718.4 losses yesterday confirms a countering bullish divergence in momentum detailed in the 240-min chart that defines Tue’s 1666.2 low also as one of developing importance as this is the level the market now needs to relapse below to resurrect a broader peak/correction/reversal count.

To be sure, 14-Apr’s 1788.8 high resulting from Tue’s bearish divergence in momentum remains intact as a key high, resistance and risk parameter the market obviously needs to recoup to mitigate any peak/reversal count and reinstate the secular bull.  In effect, we believe the market has identified 1788.8 and 1666.2 as the key directional triggers heading forward and the range traders are advised to toggle directional biases and exposure around.

On a broader scale, it’s not hard to find evidence for a move either way.  A prospectively complete 5-wave Elliott sequence up, waning upside momentum and historically frothy bullish sentiment warn of an impending top.  A relapse below 1666.2 will tilt the directional scales that way, but the secular bull is way to massive to conclude a reversal after only the minor weakness the market has shown thus far over the past week-and-a-half.

From the bull side, the market has thus far held above former general 1700-area resistance-turned-support that, against the backdrop of a massive uptrend is easily seen as just another corrective hiccup.  The bottom line is that it’s premature for the directional jury to render a verdict as to whether the recent setback is the start of a more protracted reversal lower OR another interim correction ahead of a resumption of the secular bull.  But the market has identified specific levels at 1788.8 and 1666.2 as those around which the next key move can be gauged.

These issues considered, a bullish policy and exposure remain advised for long-term players a failure below 1666.2 required to pare exposure to more conservative levels and commensurately larger-degree weakness below 01-Apr’s 1576 required to jettison remaining exposure altogether.  Shorter-term traders with tighter risk profiles taken out of bullish exposure following Tue’s momentum failure are advised to maintain a neutral/sideline position with the market constrained within the range bounded by key directional triggers at 1666.2 and 1788.8 as the risk/reward merits of initiating directional exposure are poor.  Resurrecting longs above 1788.8 or initiating bearish exposure below 1666.2 is advised.


Similarly and after Tue’s bearish divergence in momentum below 08-Apr’s 15.11 corrective low that broke at least Apr’s portion of the uptrend, overnight’s recovery above Mon’s 15.69 minor corrective high and a micro risk parameter discussed in Tue’s Technical Blog not only confirms a bullish divergence in momentum, but also renders the past week’s sell-off attempt as a 3-wave affair labeled in the 240-min chart below.  Left unaltered by a relapse below Tue’s 14.56 low, this 3-wave setback may be considered a corrective/consolidative event that warns of a resumption of Mar-Apr’s uptrend that preceded it.  Per such, Tue’s 14.56 low serves as our new micro risk parameter from which a cautious bullish policy can be objectively based.  By the same token, 14-Apr’s rejected 16.30 high remains intact as a risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed.

The market’s current position in the middle of this 14.56 – 16.30 range presents poor risk/reward merits for shorter-term traders, so a neutral/sideline position is advised for the time being with a break outside of this range needed to confirm the direction of the next decent-sized move or trend worth catching.

From a longer-term perspective, it’s hard to ignore the extent of the market’s gross failure to sustain new secular lows below the general $13-handle that should have then provided new resistance.  Indeed, the longer-term trend remains arguably up until and unless the market fails below 01-Apr’s 13.895 larger-degree corrective low.  This is what makes overnight’s recovery above a nondescript corrective high at 15.69 so compelling, as it warns that the past week’s setback may only be another minor corrective hiccup within a still-developing broader uptrend.

These issues considered, a bullish policy remains advised for long-term players with a failure below 14.56 required to pare exposure to more conservative levels and commensurately larger-degree weakness below 13.895 to jettison the position altogether.  Shorter-term traders advised to neutralize bullish exposure as a result of Tue’s short-term mo failure are advised to maintain a neutral/sideline policy for the time being while the market’s in the middle of the past week’s range bounded by 16.30 and 14.56 that we believe should also be approached as the key flexion points around which directional biases and exposure can be toggled.

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