RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

The hourly chart below shows today’s slip below a minor, nondescript corrective low at 186.75 from Thur confirming a bearish divergence in very short-term momentum.  Given the prospect that last week’s recovery is just a correction within a broader peak/correction/reversal process as discussed in Fri’s Technical Blog.  By coming within a few ticks of the (189.42) 61.8% retrace of late-Apr/early-May’s 194.00 – 182.00 plunge, we believe this admittedly short-term mo failure leaves yesterday’s 189.00 high in its wake as the end of a (B- or 2nd-Wave) correction and start of the (C- or 3rd-Wave) resumption of late-Apr/early-May’s initial downtrend to eventual new lows below 182.00.  In this regard, yesterday’s 189.00 high is considered our micro risk parameter from which non-bullish decisions like long-covers and resumed bearish punts can be objectively based and managed.

Taking a step back, the daily (above) and weekly (below) charts easily show the prospect that last week’s recovery attempt is mere a correction coming on the heels of:

  • the market’s gross rejection of the upper-quarter of the multi-year lateral range
  • a clear bearish divergence in daily momentum that, in fact, breaks Mar-Apr’s uptrend and the
  • 5-wave, impulsive nature of Apr-May’s 194.00 – 182.00 initial counter-trend decline.

These factors identifying 23-Apr’s 194.00 high as a big deal and THE risk parameter the market’s got to recoup to negate this broader peak/correction/reversal count.

Since still intact, the importance of 04-May’s 182.00 low cannot be ignored as a support candidate heading forward.  But as a result of these longer-term factors listed above and today’s bearish divergence in short-term momentum, we believe this market has defined yesterday’s 189.00 high as one of developing importance and a micro risk parameter from which bearish punts can be objectively based and managed ahead of a suspected resumption of the 194.00 – 182.00 downtrend that preceded it.

In sum, long-term players remain advised to maintain a bearish policy with a recovery above 189.00 required to pare exposure to more conservative levels and commensurately larger-degree strength above 194.00 required to jettison the position altogether.  Shorter-term traders whipsawed out of bearish exposure following 07-May’s bullish divergence in short-term mo are advised to re-establish bearish exposure at-the-market (186.00) with a recovery above 189.00 required to negate this specific call and warrant its cover.  In lieu of such 189.00+ strength, we anticipate a resumption of late-Apr’s downtrend to eventual new lows below 182.00.

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