RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Aug 19, 2022, 07:42 by Dave Toth

Today’s failure below 04-Aug’s 22412 corrective low confirms a bearish divergence in daily momentum that breaks the recovery attempt from 30-Jun’s 18635 orthodox low and renders this recovery a 3-wave affair as labeled in the daily log chart below.  Left unaltered by a recovery above 15-Aug’s resulting 25204 high and especially within the context of what still is an arguable secular bear market, this 3-wave recovery is considered a (4th-Wave) correction within this major bear that may now be poised to resume to eventual new (5th-wave) lows below 18635.  Per such, a resumed or continued bearish policy and exposure are advised with a recovery above 25204 required to threaten this call enough to warrant moving to a neutral-to-cautiously-bullish stance.  Until and unless such 25204+ strength is proven, further and possibly steep, accelerated losses are anticipated straight away.

Contributing to this resumed and major bearish count is the likelihood that this week’s range and close is an “outside WEEK down” higher high, lower low and lower close than last week’s range and close).  COMBINED with the bearish divergence in daily momentum and fact that Jun-Aug’s $6,569 pop falls well within the bounds of a mere corrective hiccup relative to the major downtrend from last Nov’s 68964 high, a (5th-wave) resumption of this secular bear market should hardly come as a surprise.

As for downside potential for this resumed bear below 18635?  There is no way to tell.  For what it’s worth, we’ve noted a number of “derived” Fibonacci retracement and progression relationships ranging from 16403 to 11182 in the weekly log chart above and monthly of chart below.  NONE of them matter at this point.  The only thing that will matter if/when the market breaks below 18635 will be MOMENTUM, and an eventual confirmed bullish divergence needed to arrest the downtrend.  Until and unless such a momentum failure break the downtrend, further losses will remain expected and the extent of those losses should not be underestimated.  To suggest that this bear will “only” drop to 18000 or 17000 or 15000 is totally baseless, subjective and/or emotional.

What matters is objectivity and specificity.  And herein lies the importance of today’s bearish divergence in momentum that specifies Mon’s 25204 high as an objective parameter from which to rebase and manage the risk of a resumed or continued bearish policy and exposure.  Per such, a bearish policy and exposure remain advised with a recovery above 25204 required to threaten this call enough to warrant moving to at least a neutral/sideline position if not a cautiously bullish one.  In lieu of such strength, a resumed crash and burn to new lows below 18635 is anticipated in the weeks and months immediately ahead.

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