RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Oct 31, 2022, 06:51 by Dave Toth

In Fri’s Technical Blog we discussed the importance of 25-Oct’s 6.281 high as the level the market needed to sustain losses below to maintain a more immediate bearish count.  The 240-min chart below shows this morning’s recovery above 6.281 that renders that high an initial (A- or 1st-Wave) counter-trend high and, as we’ll show below, confirms a bullish divergence in daily momentum.  This bullish divergence in momentum confirms 24-Oct’s 5.345 low as the end of AT LEAST the decline from 06-Oct’s 7.188 high and possibly the end of a major 5-wave Elliott sequence down from 23-Aug’s 10.119 high.

The 240-min chart below also shows that as a direct result of today’s break above 6.281, the market has identified Fri’s 5.547 low as the latest smaller-degree corrective low this market is now required to relapse below in order to render the recovery from 5.345 a 3-wave and thus corrective affair that would re-expose Aug-Oct’s broader downtrend.  Until and unless such sub-5.547 weakness is proven, a larger-degree correction of Aug-Oct’s 47% decline from 10.119 to 5.345 may lie ahead with upside potential ranging from 6.82 to 7.93 or higher.  Per such, Fri’s 5.547 low is considered our new short-term but key risk parameter from which non-bearish decisions like short-covers and new bullish punts can be objectively based and managed.

The daily log scale chart above shows today’s recovery above last Tue’s 6.281 initial counter-trend high that confirms a bullish divergence in daily momentum.  Against the backdrop of a potentially textbook complete 5-wave Elliott sequence down from 23-Aug’s 10.119 high as labeled, a correction of this entire 2-month, 47% decline could be protracted indeed, with the 38.2%, 50% and 61.8% retraces of this decline ranging from 6.821 to 7.930.

As discussed Fri, 06-Oct’s 7.436 larger-degree corrective high remains intact as the larger-degree corrective high and long-term bear risk parameter this market is still required to recoup to, in fact, break Aug-Oct’s downtrend, so it’s also possible that the past week’s recovery attempt is just a slightly larger-degree corrective hiccup within a much broader bear trend.  BUT, 1) we’ll know such a bearish count to be the case if/when the market fails below 5.547, and 2) conducting non-bearish decisions like short-covers back in the middle of the past couple months’ range is highly impractical and sub-optimal.  Per such, longer-term commercial players are advised to acknowledge and accept whipsaw risk back below 5.547 in exchange for steeper nominal risk above 7.436.

These issues considered, all traders have been advised to neutralize bearish exposure as a result of today’s recovery above 6.281 and are further advised to prepare for a (suspected 2nd-Wave) corrective rebuttal to Aug-Oct’s 10.119 – 5.345 decline that could be “extensive” in terms of both price and time.  An interim cautious bullish policy may be considered with risk accepted to a level just below Fri’s 5.547 low, the failure below which may resurrect this year’s major peak/reversal process.

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