RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

JUN & JUL CRUDE OIL

Overnight’s slip below Fri morning’s 15.64 initial counter-trend low in the Jun contract shown in the hourly chart above confirmed the bearish divergence in momentum we discussed in Fri morning’s Technical Blog that not only stems last week’s recovery attempt at Thur’s 18.26 high, but also exposes last week’s recovery as a 3-wave affair as labeled above.  Left unaltered by a recovery above 18.26, this 3-wave recovery attempt is considered a corrective/consolidative event that warns of a resumption of the secular bear trend that preceded it.  Per such, this 18.26 level is considered our new short-term risk parameter from which non-bullish decisions like long-covers and a resumed bearish policy can be objectively rebased and managed by shorter-term traders.

For those trading the Jul contract, the hourly chart below shows a similar momentum failure that leaves Thur’s 23.40 high in its wake as our new short-term risk parameter from which a resumed bearish policy can be objectively based and managed.

The 240-min chart of the Jun contract below shows the magnitude of Apr’s resumption of the secular bear trend.  But while last week’s 180% rebound is not unimpressive, compared to the previous week-and-a-half’s 80% decline, it remains well within the bounds of a mere correction.

The daily charts of the Jun contract above and Jul contract below make it easier to see the longer-term bearish prospect that last week’s recovery attempt is merely corrective within the secular bear trend.  Resumed proof of strength above at least last week’s respective high is minimally required to threaten counts calling for a resumption of the long-term downtrends.  Commensurately larger-degree strength above at least former 21.64-area support-turned-resistance in the Jun contract is required to warn of a broader base/reversal count while recoveries above 09-Apr highs at 33.15 and 35.18 remain required to truly break the secular bear trend.

On the brighter, bullish side, downside momentum is waning, market sentiment is understandably at historically bearish levels and it’s not hard to see the prospect that this market is at or near the end of a 5-wave sequence down from Jan’s highs.  These are elements typical of a major base/reversal-threat environment.  We all know it’s coming.  But the market has yet to satisfy even the first of our three reversal requirements: a bullish divergence in momentum on a scale sufficient to break or even threaten the long-term downtrend.

These issues considered, a bearish policy remains advised for long-term players with a recovery above at least last week’s 18.26 and 23.40 highs in the Jun and Jul contracts needed to pare exposure to more conservative levels.  Shorter-term traders are advised to return to a bearish policy with recoveries above these levels needed to negate this call.  This said, the market’s relapse the past couple days to the lower-quarter of the 17.29 – 23.40-range in the Jul contract presents a poor risk/reward condition to establish shorts.  Shorter-term traders are advised to wait for an intra-range pop to its upper-quarter around 21.90 OB for a preferred risk/reward bearish punt with a recovery above 23.40 required to negate this specific count and warrant its immediate cover.  In lieu of strength above last week’s highs, we anticipate a (5th-Wave) resumption of the secular bear trend in the days/weeks ahead.

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