RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

The market’s failure overnight below Tue’s 4305 corrective low confirms a bearish divergence in very short-term momentum that defines yesterday’s 4353 high as one of developing importance and a mini risk parameter from which very short-term traders can objectively base non-bullish decisions like long-covers and cautious bearish punts.  Against the backdrop of the secular bull trend however, this setback is obviously of too small a scale to be considered as anything more than another interim corrective hiccup ahead of a resumption of the secular bull.

Indeed, on almost any other scale that matters, the secular bull trend remains intact and should hardly surprise by its continuance or acceleration as the market remains above former 4258-to-4238-area resistance-turned-support and corrective lows at 4127 and 4029.  PROOF of weakness below these areas/levels remains required to threaten a peak/correction/reversal threat that could have dramatic potential thereafter.

We believe the past couple weeks’ rally is really important because of the separation away from these relatively minor corrective lows but key risk parameters at 4127 and especially 4029.  If we’re supposed to remain long this market for whatever indeterminable and potentially steep gains it has in store, we don’t believe this market should come anywhere near these corrective lows, let alone break em.  IF it does, then a sense of urgency would develop in taking defensive measures for some very long-term reasons discussed below.

The potential threats to the mega-bull include:

  • waning momentum on a WEEKLY basis shown in the weekly log chart above
    • this current momentum threat will be CONFIRMED on a failure below 4029
  • historically frothy sentiment/contrary opinion levels (66%) in the Bullish Consensus (marketvane.net) not seen in 3-1/2 YEARS
    • although the AAII Sentiment Survey shows indifferent/indecisive levels that warn of further gains
  • historically frothy stock asset allocation levels shown in the monthly log chart below, and
  • the prospect that the rally from Mar’20’s 2174 low is the completing 5th-Wave of a massive 5-wave Elliott sequence from Mar 2009’s 666 low as labeled below.

IF IF IF this market starts failing below levels like 4127 (initially) and then 4029, we believe the secular bull trend would be threatened enough to warrant paring and then neutralizing all bullish exposure to circumvent the depths unknown of a correction or reversal lower that could be major in scope.  Until and unless the market weakens below at least the 4238-area and especially 4127, setback attempts are advised to still be approached as corrective buying opportunities ahead of further and possibly protracted gains straight away.  Major reversals don’t happen overnight.  They are constructed over TIME and price action and typically are not “surprises”.  They’re only surprises to those who don’t adhere to the road map of easily identifiable and developing proof of weakness and vulnerability.  And we’re defining these levels at 4127 and 4029 as clear exit ramps.

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