RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Oct 10, 2022, 10:42 by Dave Toth

Fri’s failure below a minor corrective low and a mini risk parameter at 3734 confirms the bearish divergence in short-term momentum we discussed in 06-Octc’s Technical Blog that defines last week’s 3820 high as one of developing importance and the end or upper boundary of another suspected correction within the secular bear market.  Per such, we’re identifying 3820 as our new mini risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a resumed bearish policy and exposure.

Since the market has yet to break 03-Oct’s 3571 low however, it would be premature to conclude last week’s 3820 high as the END of the latest correction as opposed to just its upper boundary ahead of further lateral consolidation within this 3820-to-3571-range.  Clearly, however, a relapse below 3571 will reinstate the secular downtrend.

From a longer-term perspective we maintain our bearish bias as last week’s recovery attempt easily falls within the bounds of a correction within even the portion of this year’s major bear trend from 16-Aug’s 4328 high.  Stalling in the proximity of the (3802) 38.2% retrace of the decline from 13-Sep’s 4175 high to 03-Oct’s 3572 low, last week’s rebound attempt is well within the bounds of a mere correction within the broader bear.  To even defer, let alone threaten our long-term bearish count, this market must minimally recover above 3820 and, preferably, 07-Sep’s 3883 (suspected 1st-Wave) low.  In lieu of such strength, a resumption of this year’s major bear trend to new lows below 3571 should hardly come as a surprise.

Stepping back even further, the weekly log chart below shows the past couple weeks’ break below 17-Jun’s 3639 initial counter-trend low that reinstates this year’s major bear trend, confirming the drop from 16-Aug’s 4328 high as either the dramatic C-Wave of a major correction lower or the even more dramatic 3rd-Wave of a massive 5-wave bear market similar, we believe, to the 17-month, 58% drawdown from 2007’s 1576 high to Mar’09’s 666 low.  The weekly log chart below also shows understandably historically bearish levels in the Bullish Consensus (marketvane.net) and our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC.  But we would remind traders that sentiment/contrary opinion is not an applicable technical tool in the absence of an accompanying confirmed bullish divergence in momentum of a scale sufficient to threaten the major downtrend.  Herein lies the importance of identifying bear risk parameters like 4328, 3883 and even 3820.

These issues considered, a bearish policy and exposure remain advised with a recovery above at least 3820 and preferably 3883 required to pare or neutralize exposure.  In lieu of such strength, a resumption of the secular bear trend to new and perhaps monstrous lows below 3571 is expected.

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