RJO FuturesCast

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Yesterday’s slip below last Wed’s 4113 smaller-degree corrective low and short-term risk parameter discussed in Mon’s Technical Blog confirms a bearish divergence in short-term momentum that defines Fri’s 4184 high as the END of the portion of the secular bull trend from 25-Mar’s 3843 low.  Per such, this 4184 high serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively base non-bullish decisions like long-covers and cautious bearish punts.  Clearly, this 4184 level is THE level the market now needs to recoup to reinstate the secular bull.

As for the extent of the market’s expected correction lower, there is simply no way to know its downside potential.  In the 240-min chart below we’ve marked the 23.6%, 38.2% and 50% retraces of the 3843 – 4184 rally, but as always, such merely “derived” levels are meaningless without an accompanying confirmed bullish (in this case) divergence in short-term mo needed to arrest the slide and define a more reliable low and support from which the risk of a resumed bullish policy can only then be objectively based and managed.  We only define these Fib retraces at this point as gauges from which to judge the bull’s overall strength.  A minimal setback would seem to underscore and reinforce overall strength whereas a deeper retracement could be an early indication of broader weakening and vulnerability ahead of a more protracted correction.

From a longer-term perspective, clearly, this week’s slip is grossly insufficient to be considered anything more than another interim corrective hiccup within the dominant secular bull trend where commensurately larger-degree weakness below at least 25-Mar’s 3843 next larger-degree corrective low remains minimally required to threaten the bull enough for longer-term institutional players and investors to take defensive measures.  In effect, the very, very short-term trend is down within the major uptrend.

These issues considered, shorter-term traders have been advised to move to a neutral/sideline position to circumvent the depths unknown of a suspected correction of Mar-Apr’s portion of the bull.  We will keep a keen eye on shorter-term momentum and a relapse-stemming bullish divergence in short-term mo to reject/define a more reliable low and support from which the risk of a resumed bullish play can be objectively based and managed.  A bullish policy and exposure remain advised for longer-term players with a failure below 3843 still required to negate this call and warrant its cover.  Needless to say, a recovery above 4184 mitigates this correction call, reinstates the major bull and exposes potentially sharp gains thereafter.

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