RJO FuturesCast

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Overnight’s break above 22-Jan’s 3338 high nullifies 31-Jan’s bearish divergence in momentum, chalks up late-Jan’s sell-off attempt as another 3-wave correction and reinstates the secular bull trend.  This resumed strength leaves 31-Jan’s 3212 low in its wake as the latest corrective low this market is now minimally required to fail below to even defer, let alone threaten the bull.  Per such, this 3212 level serves as our new key risk parameter from which long-term players can objectively rebase and manage the risk of a resumed bullish policy and exposure.

As the market has once again established new all-time highs, there are NO levels of any technical merit above the market.  In other words, THERE IS NO RESISTANCE as candidates to inhibit the bull, so upside potential is indeterminable and potentially extreme.  The fact that late-Jan’s sell-off attempt retraced a Fibonacci minimum 23.6% on a daily log scale basis below underscores the bull’s strength.

A reinforcing factor to a full and aggressive bullish policy is the sentiment/contrary opinion fact that the huddled masses have yet to emotionally embrace the bull.  This fact was a key contributor to our bullish count throughout much of 2019 and remains one, with the Bullish Consensus (marketvane.net) measure of sentiment continuing to waft around a neutral/indifferent/confused 50% level.  Additionally, the AAII Sentiment Survey dropped sharply last week to 32% as an emotional response to the Corona virus and the Trump impeachment hyperbole.  The market- in its entire world’s collective assessment of all things- knows better.

We would also remind very long-term players of how this market reacted to major corrections similar to 2018’s 21% setback shown in the monthly log scale chart below.  Similarly sized corrections and global attitude adjustments in 2011 (22%) and 2015-16 (15%) led to long, sustained resumptions of the secular bull of 99% and 64%, respectively.

Is another gargantuan resumption of the secular bull now in effect from Dec’18’s 2317 low?  Who knows?  But this isn’t the question that should be asked.  The question should be, “Do you want to bet that such a gargantuan resumption of the bull ISN’T taking place?”  And while we concede that the market’s upside potential is indeterminable and anywhere from just a smidge more to insane, most importantly, we know precisely what levels the market now needs to fail below to defer or threaten a bullish policy: 3212 (on a relatively short-term basis) and Jul’19’s hugely pivotal 3025-area former key resistance-turned-support shown in the weekly log chart above.  Until and unless the market weakens below at least 3212, a specific and objective risk parameter where bull’s can and should pare or neutralize exposure, the market’s upside potential is indeterminable and potentially insane.  This is the exact same analysis and discipline with which we approached Jul16’s breakout above May’15’s 2134 high.

From a very short-term perspective and at the risk of picking nits with the secular bull trend, the 240-min chart below details this week’s impressive, impulsive rally that includes a smaller-degree corrective low from yesterday morning at 3311.75 that the market is required to fail below to break the very short-term uptrend.  Per such, we’re recognizing 3311 as our new short-term risk parameter from which shorter-term traders can effective rebase and manage the risk of bullish exposure from “up here”.

These issues considered, traders are advised to re-establish a full and aggressive bullish policy from at-the-market (3348) OB with a failure below 3311 for shorter-term traders to step aside and commensurately larger-degree weakness below 3212 for long-term players to neutralize exposure.  In lieu of such weakness, further and possibly prolonged, accelerated gains are once again expected following a mere corrective hiccup.

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