Posted on Sep 12, 2023, 08:01 by Dave Toth

The 240-min chart below shows yesterday’s recovery above a very minor corrective high at 0.7355 from 05-Sep confirming a bullish divergence in very short-term momentum.  This short-term mo failure defines last Thur’s 0.7303 low as one of developing importance and possibly the end of a textbook 5-wave Elliott sequence down from 14-Jul’s 0.7644 high.  Commensurately larger-degree strength above 01-Sep’s 0.7415 corrective high remains required to confirm a bullish divergence in DAILY momentum needed to confirm the end of the 5-wave decline.  But this short-term strength IS sufficient to identify last week’s 0.7303 low as one of developing importance and a mini parameter from which the risk of non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

On a broader scale, the daily chart above shows the textbook nature of a suspected complete 5-wave Elliott sequence down from 14-Jul’s 0.7644 high.  This chart also shows the nicely developing POTENTIAL for a bullish divergence in momentum that will be considered CONFIRMED to the point of non-bearish action on a recovery above 01-Sep’s 0.7415 corrective high.

The 0.7303 and 0.7415 flexion points around which this interim base/correction/recovery prospect can be navigated are also important because of 1) the market’s position deep in the middle-half bowels of the past year’s range where the odds of aimless whipsaw risk are approached as higher and 2) because of this market gross inability over the past two years to maintain a trend in either direction.  Both these reasons still warrant a more conservative approach to directional risk assumption that highlights tighter but objective risk parameters like 0.7303 and 0.7415.

These issues considered, we believe the risk/reward merits of a continued bearish policy have become questionable enough for shorter-term traders to move to a neutral/sideline policy and for even longer-term institutional players to pare exposure to more conservative levels with further strength above 0.7415 required to neutralize remaining exposure.  A relapse below 0.7303 is required to negate this call, reinstate the 2-month downtrend and re-expose potentially steep losses thereafter.  We will be watchful for a very minor 3-wave corrective retest of last week’s low that is stemmed by a countering bullish divergence in short-term mo above 0.7303 that could present a favorable risk/reward opportunity from the bull side.

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.