RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Today’s clear break above 21-Mar’s 16.665 initial counter-trend high confirms at least the intermediate-term trend as up. And while the market remains below the 16.90/.95-area that has caped this market as resistance since mid-Feb, for longer-term reasons we’ll discuss below we believe odds have swung around for a favorable risk/reward opportunity from the bull side.

First of all, this admittedly short-term proof of strength leaves Thur’s 16.33 low in its wake as a smaller-degree corrective low that the market would now be required to sustain gains above to maintain a more immediate bullish count. In this regard 16.33 is considered our new short-term risk parameter from which any non-bearish decision like short-covers and cautious bullish punts can be objectively based and managed.
On a daily basis above, the market has once again rejected the lower-quarter of the past quarter’s 15.63 – 17.70-range. And while the market’s position still deep within the middle-half bowels of the past year-and-a-half’s lateral range could easily result in more intra-range whipsaw, long-term traders are reminded of the prospect that all of the price action from Jul’16’s 21.225 high is still arguably a CORRECTION of Dec’15 – Jul’16’s initial counter-trend uptrend that warns of an eventual resumption of that uptrend to new highs above 21.225 as part of a major, multi-year base/reversal environment.

Contributing mightily AND CURRENTLY to this major bullish count is last week’s continued erosion in our RJO Bullish Sentiment Index to its LOWEST READING ON RECORD darting back to 1995! Such massively historically bearish exposure by the Managed Money community reportable to the CFTC would be absolutely fine IF the market were in the throes of a clear and present downtrend. But, quite conversely, all the bear has been able to muster up for QUARTERS is basically lateral behavior, far removed from Dec’17’s 15.635 low minimally required to even threaten our long-term base/reversal count.

Until and unless the market relapses below at least 16.33 and preferably 20-Mar’s 16.10 low, we believe this historically skewed bearish sentiment is a source of fuel for upside vulnerability as the overall market forces the capitulation of this bearish exposure. Further strength above the 16.90-to-16.95-range that has caped this market for a month-and-half could expose steep, even relentless gains immediately thereafter.
Finally and as we have advocated since Apr’16’s bullish divergence in momentum, Dec’15’s 13.62 low defines the END of the secular bear market from Apr’11’s 49.82 all-time high. The rally to Jul’16’s 21.225 high is considered the initial (A, or 1st-Wave) rally in a base/reversal environment with the subsequent relapse from that 21.225 high considered the (B- or 2nd-Wave) correction within the broader baser/reversal process that warns of an eventual resumption of the early-2016 rally to eventual new highs above 21.225.

Could such a resumed rally have started from last week’s 16.10 low? Given the historical extent to which the Managed Money community has its collective neck sticking out on the bear side, we believe the answer is yes, absolutely. And now that the market has confirmed at least short-term strength that has resulted in corrective lows like 16.33 and 16.10, very objective risk parameters have been specified from which to base and manage a bullish policy.

These issues considered, traders are advised to move to a new bullish policy and exposure from at-the-market (16.77) OB with a failure below 16.33 required to threaten this call to the point of cover. in lieu of such sub-16.33 weakness, further and possibly steep gains are anticipated straight away. Above 16.95 this market could produce steep, extended, even relentless gains.


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