The market’s failure today to sustain recent losses below 23-Oct’s 92.69 minor corrective high and our short-term risk parameter confirms a bullish divergence in momentum that defines yesterday’s 91.74 low as one of developing importance and the end of at least a textbook 5-wave Elliott sequence down from 04-Oct’s 94.47 high as labeled in the 240-min chart below.  As a result, yesterday’s 91.74 low serves as our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.

The daily bar chart above and close-only chart below show the bullish divergence in daily momentum that allows us to conclude the end of at least Oct’s portion of the past 2-1/2-months’ broader slide.  Commensurately larger-degree strength above 04-Oct’s 94.50 larger-degree corrective high and key risk parameter remains required to break the broader downtrend and conclude a complete 5-wave decline from 12-Aug’s high.

Former upper-92-handle-area support remains intact as a new resistance candidate the market needs to recoup to raise the odds of a larger-degree correction or reversal higher.  But we gotta say that Aug-Oct’s entire decline, especially on a close-only basis below, looks to be a textbook 5-wave Elliott sequence as labeled.  And f correct, we could be looking at a more protracted corrective rebuttal in the weeks ahead that could easily approach the 94-handle or higher.

While our broader peak/reversal count introduced in 05-Sep’s Technical Blog remains intact until the market closes above 12-Aug’s 95.76 high close, the momentum and Elliott factors discussed above are a sufficient deferral or threat to our broader bearish count to warrant taking profits on bearish exposure recommended from 93.50 OB in 09-Oct’s Trading Strategies Blog and moving to a neutral/sideline approach for the time being.  And if the market retests yesterday’s 91.74 low is a labored 3-wave manner, we believe the risk/reward merits of an interim bullish punt will be favorable.


Overnight’s recovery above 24-Oct’s 1.1200 smaller-degree corrective high and our short-term risk parameter reinforces our bullish count updated in yesterday’s Technical Blog and leaves Tue’s 1.1108 low in its wake as the end or lower boundary of 3-wave corrective/consolidative behavior from 21-Oct’s 1.1222 high that warns of a resumption of the uptrend that preceded it.  Per such, this 1.1108 low is considered our new key risk parameter from which a still-advised bullish policy can be objectively rebased and managed.

From a longer-term perspective we remain of the opinion that the extent and impulsiveness of Oct’s recovery thus far is only the initial (A- or 1st-Wave) of a larger-degree correction or major reversal higher.  And given the magnitude of the 19-month downtrend from Feb’18’s 1.2580 high that the market’s trying to reverse, traders are warned that this base/correction/reversal PROCESS is not unlikely to include corrective setbacks that could be extensive this early in the base/reversal process.  We will use Tue’s 1.1108 low as a relatively tight but key risk parameter around which to gauge such corrections or even a resumption of the 19-month downtrend.  Until and unless such sub-1.1108 weakness is shown however, our long-term base/reversal-threat factors listed in recent updates- like historically bearish sentiment levels- remain intact and warm of what could be surprising gains in the weeks, months and even quarters ahead.

In sum, a bullish policy and exposure remain advised with a failure below 1.1108 required to defer or threaten this cal enough to warrant moving to the sidelines.  In lieu of such weakness, further and possibly accelerated gains should not surprise.

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.