In yesterday’s Technical Blog we cited yesterday’s 3260 high as a very minor corrective high the market needed to recoup to even defer, let alone threaten the past week’s meltdown.  Yesterday’s continued plunge, late-afternoon hiccup to 3159 and subsequent relapse to yet another round of new lows left overnight’s 3159 high as the same type of minor corrective high as 3260 the market needed to recover above to confirm a bullish divergence in very short-term momentum needed to even defer the bear.  Different day, different level, same discipline.

The 240-min chart below shows this morning’s recovery above this 3159 threshold that confirms a bullish divergence in very, very short-term momentum.  We CANNOT conclude the end of the recent meltdown from such a minute momentum failure.  However, we CAN identify overnight’s 3091 low as one of developing importance and a very, very short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.

The extent of this this week’s plunge is unique indeed and virtually identical in scope to Jul-Aug’19’s relapse and Apr-Jun’19’s relapse, both tremendous buying opportunities we’ll discuss below.  It’s a fact that the uptrend from 03Oct19’s 2855 low has been broken, establishing 20-Feb’s 3398 high as THE pivotal level and key long-term risk parameter this market much now recoup to mitigate any broader peak/correction/reversal process and reinstate the secular bull.  Even an extensive recovery attempt to 3280-area levels (61.8% retrace) or above will not be able to be ignored as a (B- or 2nd-Wave) correction within a broader peak/correction/reversal count.  By the same token however, until and unless this market relapses below at least 3091, there’s no way to know that this market just completed a significant correction like one of those last year ahead of a resumption of the secular bull.

Along even interim base/correction/recovery lines, let alone a resumption of the secular bull, it is interesting to note that on a daily close-only basis below, yesterday’s 3138 low close was just two points away from the (31376) 50% retrace of Oct-Feb’s rally from 284 to 3388.

Finally, and also supportive of a count warning that this week’s relapse might be a steep but short-lived correction and buying opportunity within the secular bull, this week’s Bullish Consensus ( update shows a plunge to a historically low 42% level.  While certainly understandable under the circumstances, this equals the 42% low that warned of and accompanied Dec’18’s END to a 21% correction.  Prior to that Dec’18 period, this sentiment indicator hadn’t reached so bearish a level since Oct 2011!  The COMBINATION then of:

  • this morning’s bullish divergence in admittedly very short-term momentum
  • exact 50% retrace of Oct-Feb’s 4-1/2-MONTH rally and
  • historical bearish sentiment levels

cannot be ignored as a powerful and opportunistic one that warns of a corrective rebuttal to this week’s plunge that could be extensive OR a resumption of the secular bull.  A relapse below 3091 negates this specific call and puts the market back in harm’s way to depths unknown.

These issues considered, any interim bearish exposure is advised to be neutralized.  Cautious bullish exposure from at-the-market (3156 OB) is advised with a failure below 3091 negating this specific call and warranting its immediate cover.  In lieu of a relapse below 3091, we anticipate a correction higher that could become extensive (i.e. 3280 OB) OR a resumption of the secular bull market.

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.