RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

We introduced a peak/reversal threat in 04-Feb’s Technical Blog following that day’s bearish divergence in admittedly short-term momentum that identified 03-Feb’s 1598.5 high as one of developing importance and, for the moment, our short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed.  Since then, the 240-min chart below shows that the market has retraced exactly 61.8% of last week’s initial 1598.5 – 1551.1 decline amidst waning upside momentum.  If the market CONFIRMS this bearish divergence in very short-term momentum below Fri’s 1563.5 minor corrective low and micro risk parameter, then we’d have to conclude that the market was taking the next step in a broader peak/reversal process.

Against this developing backdrop and threat to the broader bull, we’re trailing our long-term bull risk parameter to last week’s 1551.1 low, the break below which would confirm that low as an initial counter-trend low and also confirm a bearish divergence in DAILY momentum that would, in fact, break the uptrend from at least 12Nov19’s 1446 low.

The daily log chart above shows the nicely developing POTENTIAL for a bearish divergence in momentum.  This indicator will be considered CONFIRMED to the point of larger-degree non-bullish action on a break below 05-Feb’s 1551.1 initial counter-trend low that would, in fact, expose the new long-term trend as down.  Contributing to this peak/reversal threat is a textbook 5-wave Elliott sequence from 12Nov19’s 1453.7 low to 30-Jan’s 1589.2 high on a daily close-only basis below.  A close below 04-Feb’s 1555.5 low close and/or an intra-day break below 1551.1 will confirm the momentum divergence needed for even long-term players to move to a neutral-to-bearish policy.

Lastly, from an even broader perspective, the weekly chart below shows historically frothy sentiment levels typical of such major peak/reversal environments as well as the prospect that the huge rally from Aug’18’s 1167.1 low is a complete 5-wave Elliott sequence as labeled.  Now we’re not going to conclude the major reversal of a 17-month, $430 rally on a relatively short-term momentum failure below 1551.  But what we WILL conclude are specific risk parameters at 1598.5 and even 1580.5 from which a bearish policy could be objectively based and managed ahead of indeterminable weakness and vulnerability thereafter, including what could be a multi-month or multi-quarter correction or reversal to the 1450-to-1375-area.

These issues considered, a bullish policy remains advised for long-term players with a failure below 1551 required to threaten this call enough to warrant its immediate cover.  A neutral-to-cautiously-bearish policy is advised for shorter-term traders with a recovery above 1598.5 required to negate this cal, warrant its cover and reinstate the secular bull.  The market’s current position in the middle of this pivotal 1551 – 1598-range is a coin flip, with a relapse below 1563.5 tilting the directional scales lower and a recovery above 1580.5 tilting them higher.  This is an interesting one that requires some patience within the 1598 – 1551-range.  But the direction of the inevitable breakout from this range could see a protracted move in the direction of the breakout.

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.