RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

in Fri’s Technical Blog, we identified 14-Jan’s 234.70 corrective low as our new mini risk parameter the market needed to sustain gains above to maintain a more immediate bullish count, especially as the market was engaging the prospective resistance from the upper recesses of the past couple months’ range.  The 240-min chart below shows the market’s failure today below 234.70, confirming a bearish divergence in admittedly short-term momentum, but enough to define 19-Jan’s 245.00 high as the END of this month’s rally from 03-Jan’s 220.55 key low.  Per such, last week’s 245.00 high serves as our new mini but key risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed.

From a longer-term perspective, it remains clear that the 252.35 and 220.55 borders to the past couple months’ range define this market’s key long-term directional flexion points.  Given the backdrop of the secular bull trend, long-term commercial players remain advised to maintain a cautious bullish policy and exposure with a failure below 220.55 required to threaten a bullish count enough to warrant moving immediately to at least a neutral/sideline position, or even a new cautious bearish policy.  And needless to say, a recovery above 07-Dec’s 252.35 high remains required to render the sell-off attempt from that point a 3-wave corrective affair and reinstate the secular bull.  Both of these levels are absolutely obvious, even to fundamental economists, where the fallout thereafter should not be hard to navigate.

This said and especially with regard to what would be a major momentum failure below 220.55, the extent to which the Managed Money community has its neck sticking out on the bull side is a key contributing factor to a peak/reversal threat that could be major in scope.  Indeed and as a result of this past Fri’s latest update, our RJO Bullish Sentiment Index has moved its highest level since Nov 2014 at 92% reflecting a whopping 60K long positions reportable to the CFTC versus only 5.5K shorts.  This sentiment/contrary opinion indicator means little as long as the major uptrend remains intact.  Herein lies the crucial importance of 07-Dec’s 252.35 high the market needs to recoup to maintain the secular bull trend and especially 03-Jan’s 220.55 low, the failure below it will at least threaten the major bull trend and expose the then-long-and-wrong Managed Money positions as fuel for what could be tremendous downside vulnerability.

These issues considered, short-term traders are advised to move to a neutral-to-cautiously-bearish position from 235.00 OB with a recovery above 245.00 required to negate this call and warrant its cover.  Longer-term commercial players remain OK to maintain a cautious bullish policy with a failure below 220.55 required to not only negate this call and warrant its immediate cover, but also swing around to a cautious bearish policy ahead of what could be protracted losses thereafter.

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