RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Nov 14, 2022, 10:58 by Dave Toth

With Thur’s failure below 03-Nov’s 14.28 smaller-degree corrective low and short-term risk parameter discussed in 04-Nov’s Technical Blog, the market has confirmed a bearish divergence in short-term momentum.  This mo failure defines 07-Nov’s 14.69 high as one of developing importance and our new short-term risk parameter from which shorter-term traders can objectively base non-bullish decisions like long-covers and cautious bearish punts.

As the market remains above a goodly bit of former resistance-turned-support around the 14.23-to-14.07-range, it would be premature to conclude 07-Nov’s 14.69 high as the end of a suspected 3-wave (Wave-2) correction up from 06-Oct’s 13.62 low.  Indeed, commensurately larger-degree weakness below at least Thur’s 14.20 low and especially that 14.07-area is still arguably required to confirm broader weakness.  However, it is NOT premature at all to conclude 14.69 as an objective high and resistance the market now needs to recoup to resurrect an alternate bullish count, and per such an objective bear risk parameter.

On a broader scale and while the market remains deep within the middle-half bowels of this year’s range where the odds of aimless whipsaw risk should be considered higher, traders are reminded that Thur’s admittedly short-term mo failure comes on the heels of:

  • 23-Jun’s bearish divergence in WEEKLY momentum amidst
  • historically extreme bullish sentiment/contrary opinion levels
  • an arguably complete and massive 5-wave Elliott sequence that completes the 2019 – 2022 secular bull trend
  • the extent and 5-wave impulsiveness of Jun-Jul’s initial counter-trend decline, and
  • proof of only 3-wave and thus corrective behavior thus far in the market’s recovery attempt from 06-Jul’s 13.07 low.

These technical facts warn of a massive peak/reversal process from 09-Jun’s 15.88 high.  In 23-Sep’s Technical Webcast, we discussed that day’s bearish divergence in daily momentum defining 13-Sep’s 14.94 high in the then-prompt Nov contract as the prospective end r upper boundary to a major 2nd-Wave correction of from the Jul low.  Basis the now-prompt Jan contract, this key high and bear risk parameter is defined by 13-Sep’s 14.98 high.  This 14.98 level is THE level this market needs to recoup to negate this specific bearish count.  Until and unless such strength is proven, smaller-degree mo failures like Thur’s are considered consistent and reinforcing elements WITHIN this broader peak/reversal process.

Can we conclude a resumption of Sep-Oct’s downtrend to new lows below 06-Oct’s 13.62 low as a result of Thur’s short-term momentum failure?  No.  BUT, until and unless this market refutes Thur’s bearish divergence in short-term mo with a recovery above at least 14.69, it would be ill-advised to believe that this market might not be in the early stages of a decline to not only levels below 13.62, but also below Jul’s 12.97 low.  And the sentiment/contrary opinion fact that the Managed Money community still has its neck sticking way out on the bull side as indicated by a whopping 89% reading in our RJO Bullish Sentiment Index reinforces this bearish count.  Indeed, 115K long positions reportable to the CFTC versus only 14K shorts is considered fuel for downside vulnerability.

These issues considered, a bearish policy and exposure remain advised for long-term commercial players.  Shorter-term traders have been advised to neutralize interim bullish exposure as a result of Thur’s failure below 14.28 and are further advised to consider new cautious bearish exposure from at-the-market (14.36) OB with a recovery above 14.69 required to negate this call and warrant its cover.  In lieu of a recovery above at least Fri’s 14.59 high and certainly 07-Nov’s 14.69 high, further and possibly accelerated losses are anticipated.  

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