RJO FuturesCast

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Overnight’s failure below 20-Jan’s 80.60 low and our micro risk parameter discussed in last Fri’s Technical Blog confirms a bearish divergence in very short-term momentum mas depicted in the 240-min chart below.  This mo failure defines 21-Jan’s 83.06 high as one of developing importance and a new micro risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.

Needless to say, this micro momentum failure is of a grossly insufficient SCALE to conclude anything more than another in a litany of smaller-degree corrective hiccups within the major bull trend that dates from 01Apr20’s 51.64 low.  For some ancillary but compelling reasons we’ll detail below however, traders are urged to be on the alert for the early stages of a peak/correction/reversal environment that could be significant in scope until that 83.06 high is taken out.

Commensurately larger-degree weakness below at least 11-Jan’s 78.65 next larger-degree corrective low and short-term risk parameter remains required to confirm a bearish divergence in DAILY momentum that would be the next iterative step in a broader peak/reversal process.  But it’s interesting to note the prospectively complete 5-wave Elliott sequence up from 03-Dec’s 71.07 low labeled in the daily chart below.

A failure below 78.65 will confirm the bearish divergence in mo, but it won’t necessarily jeopardize the impulsive integrity of a 5-wave count up from that 71.07 low.  Within this count, 17-Dec’s 77.41 high would be the 1st-Wave that any current (possible 4th-Wave) correction should not be able to violate.  Per such, we’re identifying 77.41 as our key long-term risk parameter, the break of which would reinforce a peak/reversal threat of a scale pertinent to even longer-term commercial players.

Lastly and as has been the case for months, the weekly log chart of the Mar contract below shows historically frothy sentiment/contrary opinion levels typical of major peak/reversal-threat environments.  As always, an accompanying confirmed bearish divergence in momentum is required to render contrary opinion applicable in the navigation of a reversal lower.  Herein lies the crucial importance of the larger-degree risk parameters at 78.65 and 77.41.

It’s also not hard to speculate on the prospect that the suspected 5-wave-complete rally from 03-Dec’s 71.07 low is the completing 5th-Wave of a massive sequence up from last Apr’s 51.64 low as labeled below.  Of course, this week’s slip hardly even registers against the magnitude of the 10-month, 60% bull, so it would clearly be premature to conclude anything but another interim corrective hiccup like this market has provided a zillion times within the 10-month rally.  But for the reasons specified above, we believe the market has identified some excellent and objective flexion points at 83.06, 78.65 and 77.41 around which to base directional biases and exposure commensurate with one’s personal risk profile.

These issues considered, shorter-term traders are advised to pare or neutralize bullish exposure with a recovery above 83.06 required to negate this call and warrant a return to a bullish stance.  Further weakness below 78.65 would certainly warrant neutralizing any remaining bullish exposure by shorter-term traders and would also be sufficient for even longer-term players to pare exposure to more conservative levels.  Additional weakness below 77.41 exposes a major correction or reversal lower and warrants covering any remaining exposure by long-term players in order to circumvent the depths unknown of such a reversal.  Needless to say, a recovery above 83.06 mitigates any peak/correction/reversal threat, reinstates the bull and exposes potentially accelerated gains thereafter.

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