RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Oct 18, 2022, 10:25 by Dave Toth

Overnight’s break above Fri’s 3734 high reaffirms our interim bullish count discussed in Thur’s Technical Blog calling for a correction of Aug-Oct’s decline from 4328 to last week’s 3502 low.  The important by-product of today’s resumed recovery above 3734 is the market’s definition of yesterday’s 3590 low as the latest smaller-degree corrective low this market now needs to sustain gains above to maintain a more immediate bullish count.  Its failure to do so will render the recovery from 3502 a 3-wave and thus corrective affair that would re-expose the major bear trend.  Per such, this 3590-level serves as our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

On the next larger daily scale however, commensurately larger-degree strength above 05-Oct’s 3820 larger-degree corrective high and key longer-term bear risk parameter remains required to confirm a bullish divergence in daily momentum, break Aug-Oct’s downtrend and expose a larger-degree correction of that nearly-two-month decline from 4328 to 3502.  If/when this market recoups 3820, the extent of the ensuing correction is a relative unknown.  Per our long-term bearish count, the only constraint is 16-Aug’s 4328 major corrective high and THE level this market is minimally required to recoup to threaten our secular bearish count.  Per such, 3820 remains intact as our longer-term bear risk parameter pertinent to intermediate-term traders, the recovery above which would warrant moving to a neutral/sideline position to circumvent the heights unknown of the suspected correction of Aug-Oct’s portion of the bear.

In effect, we believe this market has identified 3820 and 3590 as the key directional flexion points in the weeks ahead.

On a longer-term basis and arguably reinforcing an interim corrective bounce, the weekly chart below shows historically bearish sentiment levels with the market thus far holding around the Fibonacci minimum 38.2% retrace of 2020 – 2022’s entire rally from 2174 to 4808.  But it remains clear that on such a long-term scale and given the magnitude of this year’s downtrend, commensurately larger-degree strength above Aug’s 4328 major corrective high remains required to, in fact, break this year’s downtrend.  In lieu of such 4328+ strength, recovery attempts shy of 4328 fall well within the bounds of a mere correction within the new secular bear trend.

These issues considered, shorter-term traders have been advised to move to a neutral-to-cautiously-bullish stance with a failure below 3590 negating this call, warranting its cover and re-exposing the secular bear trend.  A bearish policy remains advised for intermediate-to-longer-term players with a recovery above 3820 required to defer or threaten this call enough to warrant paring or neutralizing exposure ahead of steeper suspected corrective gains.

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