RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Jan 23, 2023, 08:37 by Dave Toth

In 05-Jan’s Technical Webcast we introduced the developing prospect for a more protracted correction or reversal of Sep-Jan’s impressive, impulsive $7.375, 42% rally following a bearish divergence in admittedly short-term momentum below 23.705.  With this morning’s break below 05-Jan’s 23.26 initial counter-trend low, the market has now confirmed a bearish divergence in WEEKLY momentum that exposes a larger-degree correction or reversal lower of indeterminable and potentially protracted scope that even longer-term commercial bulls should want to avoid.

As a direct result of this next larger-degree level of weakness, the 240-min chart below shows that the market has identified today’s 24.295 high as the latest smaller-degree corrective high it is now minimally required to recoup to render the sell-off attempt from 03-Jan’s 24.775 high a 3-wave and thus corrective affair that would re-expose Sep-Jan’s broader bull.  Per such, this 24.295 level serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of an interim bearish policy and exposure.  The importance of 03-Jan’s 24.775 high goes without saying as our new long-term risk parameter from which longer-term commercial players can objectively base non-bullish decisions like long-covers and bearish punts.

As introduced in early-Jan, the list pf peak/reversal-threat factors is a lengthy and compelling one that includes:

  • confirmed bearish divergences in both daily and weekly momentum
  • an “outside WEEK down” the week of 03-Jan’s 24.775 high
  • historically frothy levels in our RJO Bullish Sentiment Index
  • an arguably complete 5-wave Elliott sequence from 01-Sep’s 17.40 low (as labeled above), that
  • stopped within $0.20-cents of the (24.54) 61.8% retrace of 2021 – 2022’s entire 3035 – 17.40 decline.

From an even longer-term perspective, because the entire 2021 – 2022 sell-off attempt looks to be a 3-wave and thus corrective affair, and given the extent and impulsiveness of Sep-Jan’s rally, it is quite possible that Sep-Jan’s rally is the start of the resumption of the secular bull market that dates from Mar’20’s 11.64 low ahead of a resumption of the long-term bull to not only levels above 30.35, but possibly towards 2011’s 49.82 all-time high.  A TON of price action has to unfold in the quarters ahead before we can get off on that tangent, but we mention such a longer-term bullish prospect because as toppy as the technical facts listed above describes this market, even a $2- or $3-dollar setback in the months ahead could well prove to be a monumental BUYING opportunity.  For the time being however and until this market can recoup at least today’s 24.295 high, traders are advised to anticipate lateral-to-lower, and possibly considerably lower prices in the weeks and even months ahead.

These issues considered, a cautiously bearish policy is advised with a recovery above 24.295 required for shorter-term traders to move to the sidelines and commensurately larger-degree strength above 24.775 required for longer-term commercial players to follow suit.  In lieu of such strength, further and possibly protracted losses should not surprise.

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.