Thur’s slip below 24-Aug’s 104.625 low reaffirms the developing downtrend and leaves 28-Aug’s 109.75 in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to confirm a bullish divergence, stem the slide and expose at least an interim correction higher. In lieu of such strength the trend is down on all scales and expected to continue and perhaps accelerate. In this regard 109.75 becomes our new short-term risk parameter for a still-advised bearish policy.
The daily chart of the Oct contract above shows the developing POTENTIAL for a bullish divergence in momentum, BUT ONLY PROOF of strength above 109.75 will CONFIRM the divergence to the point of non-bearish action like short-covers. And even then, the market would remain below former 111.15 support from 22-Jun that stands currently as the end to a prospective 1st-Wave down from 06-Jun’s 122.85 high and the long-term risk parameter the market must recoup to jeopardize the impulsive integrity of an eventual 5-wave sequence down from 122.85 that could still have much further to go.
Continuing to contribute to a bearish count is the stubbornly frothy bullish sentiment accorded this market by the Managed Money community as indicated by our proprietary RJO Bullish Sentiment Index. At a still-historically-high 86% reading DESPITE a 3-month, near-15% decline, this long-&-wrong exposure remains a source of fuel for still further downside vulnerability should the overall market force its capitulation. And only a glance at the weekly log active-continuation chart below is needed to see that there are NO LEVELS of any technical pertinence between spot and Oct’16’s 96.10 low. This does not mean we’re forecasting a move to 96.10. But it certainly does mean that until and unless the market recoups at least 109.75, its remaining downside potential is indeterminable and potentially severe, including a run at and even through last year’s 96.10 low.
In sum, a bearish policy and exposure remain advised with a recovery above 109.75 required to defer or threaten this call enough to warrant moving to a neutral/sideline position. In lieu of such 109.75+ strength further and possibly steep losses remain expected.