RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

After breaking the past three months’ lows and support on Fri, the market’s failure to sustain those losses and recovery today above our 5.28 short-term risk parameter discussed in 09-Sep’s Technical Blog confirms a bullish divergence in short-term momentum that defines Fri’s 4.97 low as one of developing importance and the end of the decline from at least 25-aug’s 5.56 next larger-degree corrective high.  Per such and especially stemming from the extreme lower recesses of a still-arguable FOUR MONTH lateral range, this 4.97 level 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.  This 4.97 level also serves as an objective short-term flexion point around which producers can pare bear hedges and end-users can base and manage cautious bull hedges.

From a longer-term perspective, it would be premature to conclude last Fri’s 4.97 as a much more significant one until and unless the market proves commensurately larger-degree strength above 25-Aug’s 5.56 Globex day-session high and our key long-term risk parameter needed to break the broader downtrend from 12-Aug’s 5.94 high.  In effect, we have a situation in which the short-term trend is up within the longer-term trend that remains arguably down, with the market defining 4.97 and 5.56 as the key flexion points.  Acknowledgement of and adherence to technical and trading SCALE is paramount under such circumstances.

Should the market recover above 5.56, it’d be easy to then speculate that the price action down from 07-May’s 6.38 high in the Dec contract is a corrective/consolidative structure that would then warn of a resumption of the secular bull trend to new highs above 6.38.  On an active-continuation basis below however, the decline from May’s 7.35 high in the then-prompt Jul contract looks to be a textbook 5-wave event that suggests the 4-month decline is just the initial A- or 1st-Wave of a major peak/reversal process.  Within such process however, the prospective B- or 2nd-Wave correction could be extensive in terms of price and time where the 50% and 61.8% retraces of the 7.35 – 4.97 decline don’t cut across until the 6.05 and 6.33 levels.

These issues considered, shorter-term traders have been advised to move to a neutral/sideline position as a result of today’s bullish divergence in short-term mo above 5.28 with a relapse below 4.97 required to negate this call, reinstate the bear and warrant a return to a bearish policy.  Longer-term commercial players remain advised to maintain a bearish policy with a recovery above 5.56 required to negate this call and warrant moving to the sidelines.  We will be watchful in the days ahead for proof of labored, corrective behavior on a setback attempt that might be stemmed by another bullish divergence in short-term mo from a level above 4.97 to contribute to a base/reversal count and present a preferred risk/reward punt from the bull side for shorter-term traders and for longer-term players to pare bearish exposure to more conservative levels.

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