On the smallest of scales, yesterday’s 2-pt poke below Mon’s 2983 low confirmed a bearish divergence in momentum.  This minor mo failure leaves 13-Sep’s 3026 high in its wake as one of developing importance and possibly the start of a larger-degree correction of the rally from 26-Aug’s 2810 low detailed in the 240-min chart below.  Per such that 3026 high may be considered a micro risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed by scalpers.

The fact that this momentum failure- despite its very small size- occurred at the extreme upper recesses of the past month-and-a-half’s range and so close to 26-Jul’s 3030 all-time high warrants attention.  This said, 10-Sep’s 2957 corrective low remains intact as the minimum level this market should be required to fail below to, in fact, break the uptrend from that 26-Aug low at 2810.  And even then, the market would still be above a key area of former resistance throughout much of Aug around the 2940-area that cannot be ignored as a new support candidate.  Per such, shorter-term traders remain advised to consider 2957 as our short-term risk parameter from which a still-advised bullish policy and exposure can be objectively based and managed.

The daily chart above also shows the market’s position at the extreme upper recesses of the past couple months’ range.  If there’s a time and place for this thing to fail miserably, it is here and now.  But again and save for very short-term scalpers, a momentum failure below at least 2957 should be required to CONFIRM a divergence of a sufficient scale to break the uptrend from 2810 and expose another intra-range relapse of indeterminable depth.

As slippery a slope as current extreme upper-range levels are to bulls, they can take solace in a few technical facts:

  • the bull remains above a preponderance of previous price action that is considered consistent with a broader bullish count
  • the simple backdrop of the secular bull market and, most importantly,
  • market sentiment/contrary opinion levels that remain closer to historical LOWS.

Indeed, recent levels in the Bullish Consensus (marketvane.net) and the American Association of Individual Investors Sentiment Survey are much closer to historical lows typical of the ends of major corrections, not levels associated with emotional frothy highs typical of peak/reversal vulnerability.  These relatively low, pessimistic contrary opinion condition could be a sign of this market’s vulnerability to HIGHER prices.

In sum and while scalpers are OK to take a punt from the bear side with a recovery above 3026 negating this call, shorter- and longer-term traders remain advised to maintain a bullish policy and exposure with a failure below 2957 still required to threaten this call enough to warrant defensive measures.  In lieu of such sub-2957 weakness, further and possibly accelerated gains remain expected.

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.