RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Aug 29, 2022, 08:22 by Dave Toth

The market’s failure this morning to sustain last week’s gains above 23-Aug’s 9.021 low detailed in the 240-min chart below renders that low an initial counter-trend low and confirms a bearish divergence in short-term momentum.  This admittedly short-term mo failure defines today’s 9.711 high as the latest smaller-degree corrective high and our new short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed.

A recovery above 9.711 is required to render the sell-off attempt from last week’s 9.987 high a 3-wave and thus corrective event that would re-expose the secular bull trend.  Until and unless this market can recoup 9.711, there’s no way to know that this decline isn’t the smaller-degree 3rd-Wave down of the early stages of a PEAK/reversal threat that could be major in scope, given the textbook 5-wave nature of the rally from 08-Aug’s 7.536 low that could be the completing 5th-Wave of a massive 5-wave Elliott sequence that dates from 2020’s 1.517 low discussed below.

The daily log chart above shows Aug’s prospective completion of a 5-wave Elliott sequence up from 30-Jun’s 5.350 low.  To CONFIRM this assertion however, commensurately larger-degree weakness below 08-Aug’s 7.536 larger-degree corrective low remains required.  This is why we maintain that 7.536 low as our key long-term bull risk parameter.  In effect, we have a situation where the short-term trend is down within a still-arguable long-term uptrend, with 7.536 and 9.711 the key directional flexion points and risk parameters around which to toggle directional biases and exposure commensurate with one’s personal risk profile.

On an even longer-term weekly log scale active-continuation basis below however, Jul-Aug’s rally from 5.324 to 10.028 cannot be overlooked as the completing 5th-Wave of a massive Elliott sequence up from Jun’20’s 1.517 low that, if correct, would warn of a peak/reversal-threat environment that would be major in scope, spanning quarters or even years.  The next reinforcing step for such a count would be the Oct contract’s larger-degree momentum failure below 7.536.  The defer or threaten this count, the market needs to recover above at least today’s 9.711 high and especially last week’s 9.987 high.

These issues considered, shorter-term traders with tighter risk profiles are advised to move to a neutral/sideline position to circumvent the depths unknown of a larger-degree correction or bigger reversal lower.  Longer-term commercial players are advised to pare bullish exposure to more conservative levels and jettison remaining exposure on a failure below 7.536.  A recovery above 9.711 would warrant returning to a full bullish position and for shorter-term traders to step back in cautiously on the bull side.

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