RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Oct 26, 2022, 07:43 by Dave Toth

Overnight’s recovery above 14-Oct’s 138.52 corrective high and our short-term risk parameter discussed in 20-Oct’s Technical Blog confirms a bullish divergence in short-term momentum that defines 21-Oct’s 134.02 low as the end of at least the downtrend from 04-Oct’s 142.87 larger-degree corrective high.  Per such, this 134.02 low is one of developing importance and our new short-term parameter from which the risk of non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed by shorter-term traders with tighter risk profiles.

From a longer-term perspective, commensurately larger-degree strength above 04-Oct’s 142.87 larger-degree corrective high and key long-term risk parameter remains required to confirm a bullish divergence in momentum of a scale sufficient to break the downtrend from even 02-Aug’s 156.87 high, let alone threaten the secular bear market.  In effect, the short-term trend is up within the still-arguable secular bear trend.

This said, it is interesting to note the POSSIBILITY that Aug-Oct’s portion of the secular bear trend could be the completing 5th-Wave to a massive 5-wave Elliott sequence down from Dec’20’s orthodox high of 178.77.  Obviously, TONS of basing behavior in the weeks or even months ahead, including, minimally, a recovery above 142.87 is required to raise the odds of a base/reversal threat that could be major in scope.  We cannot conclude a major bottom from such piddly strength as the market has provided over the past week.  But while last week’s 134.02 low remains intact, so too does the prospect for lateral-to-higher prices in the days and perhaps even weeks ahead.  And if this is what the market has in store, we should be on the look-out for proof of labored, 3-wave corrective behavior on a setback attempt against this current pop from 134.02.  If/when the market satisfies this requirement, a favorable risk/reward opportunity from the bull side will be presented to shorter-term traders.

These issues considered, shorter-term traders have been advised to move to a neutral/sideline position as a result of today’s recovery above 138.52.  A bearish policy and exposure remain advised for long-term institutional players with a recovery above 142.87 required to negate this call and warrant its cover.  For longer-term players who don’t want to risk bearish exposure to 142.87, they have the option of paring bear risk as a result of today’s short-term momentum failure and acknowledging and accepting whipsaw risk back below 134.02 in exchange for steeper nominal risk above 142.87.

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