RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Today’s impressive recovery above both Mon’s 3.1555 initial counter-trend high and our short-term risk parameter defined by 06-Mar’s 3.1780 high confirms last Fri’s 3.0555 low as the END of the decline from 16-Feb’s 3.2720 high and start of either another intra-range corrective rebound or a resumption of the secular bull market. This rejection of the lower recesses of the past quarter’s range leaves yesterday’s corrective low in its wake at 3.1025 as the latest smaller-degree corrective low and new micro risk parameter this market is now minimally required to fail below to mitigate a more immediate bullish count, render the recovery from 3.0555 a 3-wave and thus corrective affair and tilt the intra-day range directional scales once again to the downside. In lieu of such sub-3.1025 weakness further and possibly surprising gains are anticipated.
Since the initial threat to the secular bull discussed in 03-Jan’s Technical Blog, we’ve been dealing with the challenge of trying to discern whether the lateral-to-lower price action from 28-Dec’s 3.3220 high is that of a mere correction/consolidation ahead of the bull’s eventual resumption or a more extensive reversal lower. Both prospects remain in play, but as a result of today’s recovery, rejection of the lower recesses of the past quarter’s range AND the erosion to a 17-month low of 61% in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC, we believe the directional scales have tilted back towards the bull side enough to warrant re-establishing a cautious bullish policy. If correct, the reward could easily be a resumption of the secular bull to new highs above 3.3220. For, indeed, the market has yet to provide the evidence necessary to suggests the secular uptrend is over. Commensurately larger-degree weakness below at least 09-Feb’s 3.0260 larger-degree corrective low and key risk parameter remains required to suggest otherwise.
Finally, it’s hard to ignore the perceived “headliner” factor in the monthly log scale chart below that the major uptrend has thus far stalled at basically the exact 61.8% retrace of 2011 – 2016’s secular bear market from 4.65 to 1.9355. While certainly interesting, we’ve advised traders for years that such merely derived technical levels are unreliable in the absence of a confirmed bearish (in this case) divergence in momentum of a scale sufficient to break the uptrend in question.

As discussed in early-Jan’s updates, the market certainly did confirm a bearish divergence in momentum. But this was only of a scale that allowed us to conclude the end of the portion of the uptrend from 05-Dec;s 2.9430 low. This mo failure was NOT of a scale necessary to conclude the end of the 2-YEAR bull, exposing the prospect for just another (slightly larger-degree) CORRECTION within the still-unfolding secular advance. Today’s rally and the erosion in our RJO Bullish Sentiment Index is evidence that reinforces this broader bullish count and, most importantly, identifies yesterday’s 3.1025 corrective low and Fri’s 3.0555 low as specific and reliable risk parameters from which a resumed bullish policy can be objectively based and managed.

These issues considered, long-term players remain advised to maintain a bullish policy with a failure below 3.0555 required to pare this exposure to more conservative levels and subsequent weakness below 3.0260 required to jettison the position altogether. Shorter-term traders are advised to return to a cautious bullish policy and first approach setback attempts to the 3.1550-area as corrective buying opportunities with a failure below 3.1025 required to step aside. In lieu of such weakness we anticipate further lateral-to-higher prices in the week(s) ahead and eventually a resumption of the secular bull to new highs above 3.3220.


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