RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

After posting a new low Tues for this year’s broader reversal, the market’s failure to sustain this latest spate of weakness and recovery today above 25-May’s 133.575 corrective high and key bear risk parameter discussed in Tue’s Technical Blog confirms a bullish divergence in daily momentum that breaks this downtrend.  The hourly chart below clearly shows Tue’s 129.975 low as one of developing importance and our new key risk parameter from which non-bearish decisions like short-covers and bullish punts can be objectively based and managed.

Today’s confirmed bullish divergence in daily momentum spearheads a compelling list of base/reversal-threat elements that also include:

  • a complete and textbook 5-wave Elliott sequence down from 22-Apr’s 141.75 high
  • the return to historically bearish levels in both our RJO Bullish Sentiment Index and Bullish Consensus (marketvane.net) that haven’t been seen in two years
  • a likely “outside WEEK up” (lower low, higher high and higher close than last week’s range and close) shown below, and 
  • the market’s rejection thus far of a massive FOUR-YEAR area of former 134-to-127-handle-area resistance that, since broken last Nov, stands as a key new support candidate on a monthly log active-continuation basis below.

Given the magnitude of the broader relapse from 10-Feb’s 141.82 high, today’s strength is far from a sufficient scale to conclude a major reversal higher or even the possible resumption of the secular bull trend.  But until and unless this market relapses below 129.975 specifically, at least a larger-degree correction and possibly a more protracted reversal are now in play.  Per such, all previously recommended bearish policy and exposure has been nullified and covered.  Traders are also advised to first approach setback attempts as corrective buying opportunities with a failure below 129.975 negating this call.  Since the initial counter-trend rally has to peak however, there’s no way to speculate of a retrace area that we believe would offer a preferred risk/reward buy.  For the time being then, a neutral/sideline policy is advised.  Jumping the gun on bullish exposure as a result of today’s rally assumes risk of such to levels just below 129.975.

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