RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Jan 24, 2023, 08:47 by Dave Toth

After posting a new high for the 2-1/2-month recovery last week above 12-Jan’s 96.29 high, the 240-min chart of the Mar24 SOFR contract below shows flagging price action and the market’s now-close proximity to 17-Jan’s 96.08 smaller-degree corrective low it needs to sustain gains above to avoid breaking the uptrend from 06-Jan’s 95.73 larger-degree corrective low.  As a result of last week’s new highs, 17-Jan’s 96.08 low serves as our short-term bull risk parameter pertinent to shorter-term traders with tighter risk profiles.  A failure below 96.08 will warrant a move to a neutral/sideline position as the depths of a bigger correction or reversal below 96.08 are indeterminable, with no levels of any technical merit below 96.08 shy of 06-Jan’s 95.73 low.

On a broader scale, our major base/reversal count remains predicated on a unique and compelling list of technical facts that include:

  • 15-Nov’s bullish divergence in daily momentum above 28-Oct’s 96.01 corrective high that completed a textbook 5-wave Elliott sequence down from 06-Jul’s 97.62 high.
  • last week’s break above 14-Dec’s 96.28 initial counter-trend high that confirms a bullish divergence in WEEKLY momentum.
  • recent (Nov) lows (21%) in the Bullish Consensus (marketvane.net) that were the lowest in 16 YEARS.
  • an arguably complete and massive 5-wave Elliott sequence down from Aug’20’s 99.965 high weekly close (below) in which
  • the suspected completing 5th-Wave down from 29-Jul’s 97.50 (4th-Wave) corrective high weekly close came within 1.5-bps of the (95.48) 0.618 progression of the net distance of Waves-I-thru-III (99.965 – 96.695), and as well discuss below…..
  • the market working an “outside MONTH up” this month (higher high, lower low and prospective higher close than Dec’22’s range and close.

Per this broader base/reversal count, the daily chart above shows 06-Jan’s 95.73 low to be the latest larger-degree corrective low.  The rally from that low is either the 3rd-Wave of an eventual and more protracted 5-wave sequence up OR the completing C-Wave of a correction ahead of a prospective resumption of the secular bear market.  And while a break below 04-Nov’s 95.30 low is certainly required to negate any bullish count and reinstate the secular bear, we’re defining 95.73 as our key longer-term parameter from which longer-term institutional players can objectively base non-bearish decisions like short-covers and new bullish exposure.

On an even broader scale, the monthly chart below shows the “outside month up” the market is working on this month, waning downside momentum, historically bearish sentiment levels and an arguably textbook 5-wave Elliott sequence down from Aug’20’s 99.895 intra-week high.  Again, this is a compelling and extensive list of technical facts and observations that warns of a base/reversal threat that could be major in scope.  But if this is what the market has in store for us, then it needs to BEHAVE LIKE A BULL and sustain trendy, impulsive behavior higher and above larger-degree corrective lows like 95.73.  Its failure to do so could easily re-expose a downtrend that has been the dominant technical event for over two years.

These issues considered, a bullish policy and exposure are advised with a failure below 96.08 required for shorter-term traders to move to the sidelines.  Commensurately large-degree weakness below 95.73 is advised for longer-term institutional players to follow suit.

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