This morning’s recovery above last Wed’s 5.36 minor corrective high and our short-term risk parameter discussed in Fri’s Technical Blog confirms a bullish divergence in short-term momentum that defines Fri’s 5.07 low as the end of the relapse from 01-Jul’s 6.10 high.  Per such, this 5.07 level not only serves as our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed, the fact that this short-term mo failure stems from the extreme lower recesses of the past couple months’ range resurrects the major correction-vs-reversal debate down from 07-May’s 6.38 high.  Until and unless the market relapses below 5.07, at least another intra-range rebound is expected and possibly a resumption of the secular bull trend.

The fact that today’s bullish divergence in short-term mo stems from the extreme lower recesses of the past couple months’ range is crucial for any longer-term bullish count as it maintains the prospect that the merely lateral price action down from 07-May’s 6.38 high is 3-wave corrective/consolidative.  As recently discussed, a break below 26-May’s 5.00 low and key risk parameter remains required to tilt the longer-term directional scales in favor of a major reversal.  Now, a short-term failure below 5.07 will raise the odds of a sub-5.00 failure.  UNTIL at least such sub-5.07 weakness is proven, another intra-range corrective rebound OR a resumption of the secular bull trend is acknowledged.

These issues considered, traders are advised to move to a cautious bullish policy and exposure from current 5.35-area levels OB are advised with a failure below 5.07 negating this specific count and warranting its immediate cover ahead of resurrected odds of a major reversal below 5.00.  In lieu of such sub-5.07 weakness, lateral-to-higher prices straight away should not surprise, including the possibility of a resumption of the secular bull trend.

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.