RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

The past couple days’ explosive resumption of the secular bull trend above 05-Aug’s 4.211 high in the now-prompt Oct contract obviously confirms our count discussed in Thur morning’s Technical Blog following last week’s bullish divergence in short-term momentum that allowed us to identify 19-Aug’s 3.734 low in the Sep contract and that day’s 3.751 low in the Oct contract as the prospective end to a (4th-Wave) correction down from 26-Jul’s 4.156 high as labeled in the daily log chart below.  On this broader scale then, that 3.751 low becomes our new long-term risk parameter the market is now required to fail below to threaten the major bull and warrant a move to a new neutral-to-bearish policy by longer-term commercial players.

From a shorter-term perspective detailed in the 240-min chart above, the past few day’s sharp rally is highly characteristic of a smaller-degree 3rd-wave that likely needs an interim 4th-wave correction as part of a slowdown process and another round of (5th-wave) highs thereafter to complete the count and present even the POTENTIAL for a bearish divergence in momentum needed to stem the bull.  As the end to such an interim corrective dip has yet to materialize, the only shorter-term risk parameter we have at this time is 24-Aug’s 3.989 minor 1st-Wave high.  As such a wide stop is too impractical for shorter-term traders, we advise using a very minor corrective low at 4.221 from early Fri morning as a mini risk parameter, acknowledging the higher likelihood of whipsaw risk before the bull resumes; pick your poison.

From a very long-term perspective, we introduced a major base/reversal count more than a year ago in 03Aug20’s Technical Blog and have discussed a 2016-to-2018-type 200%+ reversal to 4.000+ ever since.  For all intents and purposes, this count has been confirmed, putting us now in the camp of having to be on the lookout for the technical elements typical of major PEAK/reversal environments.  While two of the three elements- historically frothy sentiment/contrary opinion levels and an arguably complete Elliott Wave sequence- of the ends of major bull trends are important, the initial key to navigating the end of a bull trend is MOMENTUM.  Until and unless the market breaks the clear and present uptrend on a scale sufficient to even threaten the major bull trend, further gains remain expected.  Herein lies the crucial importance of identifying a larger-degree corrective low and key risk parameter like 3.751.  This is the MINIMUM level this market now needs to break to threaten the secular bull and expose a major top.  Until such weakness is proven, it would be premature to conclude an end to this major bull trend as remaining upside potential remains indeterminable and potentially extreme, including a break of Nov’18’s 4.929 high.

These issues considered, a bullish policy and exposure remain advised with a failure below 4.221 required for shorter-term traders with tighter risk profiles to move to a neutral/sideline position in order to circumvent the depths unknown of a suspected interim (4th-Wave) correction.  This much tighter risk parameter acknowledges and accepts whipsaw risk in exchange for deeper nominal risk below 3.989.  Longer-term commercial players remain advised to maintain a bullish policy with a failure below 3.751 required to move to the sidelines ahead of what would then be approached as a major peak/reversal threat.  In lieu of such weakness, further and possibly steep gains remain expected.

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