The 240-min chart below shows that overnight’s slip below last Thur’s 151.21 minor corrective low confirms a bearish divergence in momentum.  This is a very minor momentum failure and of too small a scale to allow us to conclude Fri’s 153.80 high as the end of a 5-wave Elliott sequence up from 16-Jun’s 140-.67 low.  But given the market’s quick and exact 38.2% retrace of a massive suspected 3rd-Wave decline from Aug’21’s 177.61 high as well as relapses in the t-note and eurodollar markets this month, it is not too early to identify Fri’s 153.80 high as a very tight but objective risk parameter from which to base non-bullish decisions like long-covers and bearish punts.

Commensurately larger-degree weakness below 10-Jul’s 149.75 corrective low and short-term risk parameter will, in fact, break the uptrend from 16-Jun’s 140.67 low and our interim bullish count introduce in 23-Jun’s Technical Blog following that day’s bullish divergence in momentum above 145.51.  As to whether Jun-Jul’s rebound is only the A-Wave component of a bear market correction that has further lateral chop in store OR a complete and major 4th-Wave correction ahead of a (5th-Wave) resumption of the secular bull will have to be played by ear even though, theoretically, Jun-Jul’s 5-wave-appearing recovery warns of further consolidation.  In either case however, Fri’s 153.80 high is developing into an objective level around which to objectively toggle directional biases and exposure.

Stepping back, the daily chart above shows the nicely developing POTENTIAL for a bearish divergence in momentum.  This indicator will be CONFIRMED to the point on non-bullish action on a failure below 11-Jul’s 149.75 corrective low.  Against this backdrop and the aforementioned bearish divergence in very short-term momentum, the market’s exact 38.2% retrace of the suspected and massive 3rd-Wave decline from Aug’21’s 177.61 high to last month’s 140.67 low shown in the weekly log scale chart below becomes a compelling addition to at least an interim peak/correction/reversal count.

These issues considered, shorter-term traders with tighter risk profiles are advised to at least neutralize previously recommended bullish exposure and even move to a cautious bearish stance with a recovery above 153.80 negating this call and warranting its cover.  Longer-term institutional players are advised to pare bullish exposure to more conservative levels and reverse into a cautious bearish policy on a failure below 149.75.  Needless to say, a recovery above 153.80 reaffirms and reinstate the past month’s uptrend and exposes further and possibly steep gains thereafter.

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.