RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

As a result of yesterday’s continuation of the past week’s relapse, the 240-min chart below shows that the market has left Mon’s 3.049 high in its wake in the now-prompt Nov contract as the latest smaller-degree corrective high it would not be expected to sustain losses below to maintain this downtrend.  Its failure to do so would confirm a bullish divergence in momentum, stem the slide and expose at least another intra-range rebound.  In this regard we’re considering 3.050 as our new short-term risk parameter to any non-bearish decisions like short-covers or cautious bullish punts.

This said however, we believe the combination of:

  • this waning downside momentum
  • the market’s proximity to 08-Sep’s key 2.957 low and the lower-quarter of the past quarter’s 3.21 – 2.88-range and
  • an arguably complete, even textbook 5-wave Elliott sequence down from 19-Sep’s 3.214 high

warrants jumping the gun here a little bit and moving to a neutral-to-cautiously-bullish policy from current 3.030-area prices OB with a failure below our long-term risk parameter defined by that 08-Sep 2.957 low.

Natural Gas 240 min Chart

Natural Gas Daily Chart

On a broader daily basis above, there is no question that Aug-Sep’s recovery from 2.886 to 3.214 THUS FAR is only a 3-wave affair as labeled.  Combined with the market’s rejection of the (3.223) 5-% retrace of May-Aug’s 3.561 – 2.886 decline, it is not hard at all to envision Aug-Sep’s recovery attempt as a corrective structure that warns of a resumption of May-Aug’s major downtrend that preceded it.  Proof of weakness below 08-Sep’s 2.957 low and our key risk parameter remains required however to confirm such a count and expose a run at new lows below 2.886.

Until such sub-2.957 weakness is confirmed however, and especially if this market confirms a short-term mo failure above 3.050, we can also look back at the past three months’ price action as a major “rounding-bottom” reversal-threat pattern.  And on an even broader weekly basis of the Nov contract below, such a broader, if intra-range recovery is reinforced by the prospect that the sell-off attempt from Dec’16’s 3.654 high is just a 3-wave and arguably corrective structure in which the prospect C-Wave down from 12-May’s 3.561 was identical in length (i.e. 1.000 progression) to Dec-Feb’s initial 3.654 – 2.976 decline.

Natural Gas Weekly Chart


The bottom line on this market, and perhaps best illustrated in the weekly log active-continuation chart below, is that it remains deep within a “ranges-within-ranges” environment in which aimless whipsaw risk is the rule rather than the exception.  Few trading home runs are hit under such aimless, lateral, choppy and not atypical environments that warrant a more conservative approach to risk assumption.

These issues considered, traders are advised to move to a neutral-to-cautiously-bullish stance from current 3.030-area levels OB with a failure below 2.957 required to negate this call.  In lieu of such weakness and especially following a bullish divergence in short-term mo above 3.050, we’d anticipate at least a return to the upper recesses of the 3-month range in the 3.15-to-3.20-area and possibly a break above last week’s 3.214 high.

Natural Gas Weekly Chart

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.