RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

DEC CRUDE OIL

The market’s failure overnight below 12-Oct’s 39.04 low confirms last week’s 41.90 high as the END of the intra-range recovery attempt from at least 02-Oct’s 36.63 low and our new short-term risk parameter from which traders can objectively base non-bullish decisions like long-covers and cautious bearish punts.  This resumed weakness also identifies Fri’s 40.92 high as a smaller-degree corrective high and a micro risk parameter from which cautious bearish punts can be managed.

Per a broader peak/correction/reversal count discussed below, former 39.05-to-39.75-area support would be expected to hold as new near-term resistance.

Today’s admittedly shorter-term, intra-range weakness is important from a longer-term perspective because of the market’s rejection once again of the upper recesses of the past couple months’ range we would expect per the major peak/correction/reversal count introduced in 02-Sep’s Technical Webcast that contended 26-Aug’s 43.78 high competed a 5-wave Elliott sequence up from 21-Apr’s 6.50 low.  Historically frothy bullish sentiment, the market’s acknowledgement of former 42-handle-area support from Dec’18 as a new resistance candidate and rejection of the (43.05-area) 61.8% retrace of this year’s 65.65 – 6.50 meltdown all warned of and still contribute to a peak/correction/reversal of Apr-Aug’s 6.50 – 43.78 rally.

As for the remainder of the market’s correction from 26-Aug’s 43.78 high and key long-term risk parameter, it is indeterminable whether the market will hold above 08-Sep’s 36.13 low and support.  If this level is going to hold and create another favorable, if intra-range risk/reward opportunity from the buy side, then we would fully expect the market to confirm a relapse-stemming bullish divergence in short-term momentum from the lower-quarter of this range.  Until and unless such a mo failure arrests the current and at least intermediate-term downtrend, traders are advised to embrace the slide and prepare a game plan for the eventual break below that obviously pivotal 36.13 low.

Below 36.13 are NO levels of any technical merit shy of last Apr’s 6.50 low.  This does not mean we’re forecasting a move to sub-10.00 levels.  But it certainly does mean that the market’s downside potential below 36.13 is indeterminable and potentially severe.

These issues considered, a bearish policy remains advised for long-term players with a recovery above 41.90 required to pare exposure to more conservative levels and commensurately larger-degree strength above 43.78 required to negate this call altogether, warrant its complete cover and reinstate the bull that would then warrant a new bullish policy.  Shorter-term traders with tighter risk profiles are advised to maintain a cautious bearish policy with a recovery above 40.92 required to negate this specific call and warrant its cover.

DEC RBOB

Overnight’s break below last week’s 1.1184 low in the now-prompt Dec contract reaffirms our bearish count discussed in 12-Oct’s Technical Webcast and leaves Thur’s 1.1583 high in its wake as the latest smaller-degree corrective high this market is now required to recoup to negate the clear and present and still-developing intermediate-term downtrend.  In lieu of such strength, further and possibly accelerated losses are expected.  Per such, this 1.1583 level is considered our new short-term risk parameter from which a cautious bearish policy can be objectively rebased and managed.

From a longer-term perspective, it’s easy to see the similarities of the technical construct to those detailed above in crude, not surprisingly.  The market has clearly been peaking/correcting/reversing since 25-Aug’s 1.2253 high, which serves as our key long-term risk parameter.  Whether or not 08-Sep’s 1.0543 lower boundary to the 2-month range will hold or not is unknown, but if it’s going to, the market will be required to stem the clear and present intermediate-term downtrend with a bullish divergence in mo.  Herein lies the importance of identifying a tighter but objective bear risk parameter like 1.1583.  Until and unless such strength is proven, traders are urged not to underestimate this market’s downside potential, especially if it breaks 1.0543.

The weekly log chart below shows upside momentum waning since Jun amidst frothy-enough levels of market sentiment that cannot be ignored as fuel for downside vulnerability.

In sum, a cautious bearish policy and exposure remain advised with a recovery above 1.1583 required for shorter-term traders to move to the sidelines.  Commensurately larger-degree strength above 1.2253 is required to negate this peak/reversal count for long-term players and warrant a reversal into a new bullish policy.  Until and unless such strength is shown, further and possibly accelerated losses should not surprise.

RJO Market Insights

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