RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Against the backdrop of the past month’s relative 14% collapse we believe the past couple days’ relapse defines Thur’s 50.14 high in the now-prompt May contract as the end or upper boundary to a suspected correction ahead of a resumption of the past month’s slide.  Per such we are considering 50.14 our new short-term risk parameter to a still-advised, if interim, cautious bearish policy.  A recovery above 50.14 would allow us to conclude that high as an initial counter-trend high and a bullish divergence in momentum that would threaten Feb-Mar’s slide and could resurrect a broader bullish scenario that remains counter to most conventional fundamental wisdom.

The 240-min chart below also shows last week’s recovery attempt stalling a few cents shy of the (50.22) 38.2% retrace of the preceding (suspected 3rd-Wave) break from 07-Mar’s 54.29 high to 14-Mar’s 47.71 low.  Such a Fibonacci minimum retrace perfectly describes a (suspected 4th-Wave) correction ahead of a (5th-Wave) resumption of the past month’s slide.  A recovery above last week’s 50.14 high would not necessarily negate this call, but for reasons we’ll discuss below we believe it would threaten it enough to make maintaining bearish exposure “down here” a poor risk/reward bet and warrant a move to the sidelines.

Crude Light 240 Chart

Concern over the POSSIBILITY of the past month’s slide coming to an end stems from the combination of the POTENTIAL for a bullish divergence in momentum around the (47.18) 61.8% retrace of Nov-Jan’s 42.20 – 55.24 rally shown in the daily active-continuation chart below that is now reflecting May contract prices.  IF our long-term bullish count is correct, it would be from just such a combination of factors.

Crude Light Daily Chart

Crude Light Weekly Chart

We alluded to the past month’s collapse being “relative” in our opening statement.  This is because despite it’s steep, fairly uninterrupted nature since finally breaking the 51-handle-area that supported it for the prior two months, the decline from even 03-Jan’s 55.24 high has yet to counter the past YEAR’S major uptrend even to the extent that Oct-Nov’16 or Jun-Aug’16’s setbacks did.  Per such the past 2-1/2-months’ relapse attempt still falls well within the bounds of a CORRECTION within the even larger-degree uptrend from 11Feb16’s 26.05 low.

A frothy high 92% reading in our RJO Bullish Sentiment Index no doubt contributed to the peak/reversal threat in Jan/Feb that has led to the current relapse.  But traders are reminded of the magnitude of the past year’s uptrend that has, in fact, broken the secular bear market from May’11’s 114.83 high.  And with a current 28% reading in the Bullish Consensus (marketvane.net) measure of momentum, it would be premature to ignore the long-term possibility that the new secular trend in crude oil prices is actually UP.  ON such a major scale a failure below last Nov’s 42.20 major corrective low and key long-term risk parameter remains required to break the past year’s uptrend and mitigate a long-term bullish count.

These issues considered, a bearish policy remains advised with a recovery above 50.14 in the now-prompt May contract “enough” to threaten this call to warrant a move to the sidelines by both short- and longer-term traders ahead of a base/reversal threat that could surprise in scope.  In lieu of at least such 50.14+ strength however the trend is down on all practical scales and should not surprise by its continuance.  In effect traders are advised to toggle directional biases and exposure around 50.14.

Crude Light Monthly 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.