RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

This morning’s recovery above Fri’s 2499 corrective high and short-term risk parameter discussed in Mon’s Technical Blog confirms a bullish divergence in momentum that defines Mon’s 2174 low as one of developing importance and very possibly the END of a major 5-wave sequence down from 20-Feb’s 3398 all-time high.  Per such, this 2174 level becomes our new short-term risk parameter from which non-bearish decisions like short-covers and bullish punts can be objectively based and managed.

In addition to this bullish divergence in momentum, the prospect that the decline from 20-Feb’s 3398 high is a complete 5-wave Elliott sequence as labeled in the daily log scale chart above.  Additionally, the weekly log chart below shows that the Bullish Consensus (marketvane.net) measure of market sentiment/contrary opinion has, understandably, dropped to a historically bearish 28% level not seen since Mar 2003!  Such grotesque bearish sentiment, rendered “applicable” as a technical tool because of today’s bullish divergence in momentum, warns of not only higher prices, but a VULNERABILITY to potentially sharply higher prices in the weeks ahead.

This COMBINATION of technical facts and observations is a powerful one that now warns of at least a corrective rebuttal of Feb-Mar’s collapse that we believe can be “extensive” (i.e. more than 50% or even 61.8% retrace), possibly to the 2850-area or higher.

From an even longer-term perspective shown in the monthly log scale chart below, the combination of:

  • a confirmed bearish divergence in MONTHLY momentum
  • an arguably complete and massive 5-wave Elliott sequence up from Mar 2009’s 666 low and
  • the extent and impulsiveness of the recent Feb-Mar decline

is indeed worrisome as this warns that this recent decline may only be the INITIAL (A- or 1st-Wave) of a more protracted bear market that could span quarters or years until and unless negated by a recovery above 20-Feb’s 3398 high and key secular risk parameter.  IF this longer-term bearish count is correct, we would expect to see a recovery-countering bearish divergence in momentum weeks from now and from that 61.8% retracement around around 2865.  But we can only cross that bridge and those conditions if/when we get there.  For the time being, we anticipate a recovery in the weeks ahead that could be extensive straight away, with a failure below 2174 required to negate this call, reinstate the bear and expose potentially sharp losses thereafter.

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