RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

This morning relapse below 12-May’s 3855 low confirms our suspicions discussed in Wed’s Technical Blog that the recent recovery attempt is just another correction within the secular bear market.  The important by-products of this resumed bear trend are the market’s definition of smaller- and larger-degree corrective highs at 3950 and 4095 that this market is now required to recoup to even defer, let alone threaten the major bear trend.  Per such, these levels represent our new short- and long-term risk parameters from which a still-advised bearish policy and exposure can be objectively rebased and managed.

On a broader scale, only a glance at the daily (above) and weekly (below) log scale charts is needed to see that the trend is down on all scales with NO support candidates to be found.  At this stage in the developing downtrend, the ONLY levels of any technical merit lie ABOVE the market in the form of corrective highs like 3950 and 4095.  Until and unless the market recoups these levels, the trend remains down and should bot surprise by its continuance or acceleration.

As for remaining downside potential, it’s important to understand that the decline from 29-Mar’s 4631 high is either the completing C-Wave of a major BULL market correction OR the dramatic 3rd-Wave down of a major reversal lower.  Until countered by a bullish divergence in larger-degree momentum above 4095, we continue to bias WITH the clear and present downtrend and the 3rd-wave-dwon count.  And 3rd-waves are characterized by steep, sustained, trendy, impulsive behavior where, in this case, the 1.618 and 2.618 progressions of Jan-Mar’s initial 4808 – 4129 decline, taken from 29-Mar’s 4631 low, don’t cut across until the 3620 and 3109 levels.

We are not forecasting a move to either of these levels as forecasts typically aren’t worth the paper they’re written on.  We cite these merely “derived” levels only to emphasize the potentially dire nature of this bear trend.  This market could pull up shy of these levels or demolish them as there’s no way to know how low “low” is.  What we CAN and do state with specificity are levels the bear should NOT recoup in order to maintain the impulsive integrity of a continued bearish count:  3950 on a short-term basis and 4095 on a longer-term basis.  Until and unless such strength is proven, further and possibly accelerated, long-term losses remain expected straight away.

These issues considered, a full and aggressive bearish policy and exposure remain advised with a recovery above 3950 required for shorter-term traders to move to the sidelines and commensurately larger-degree strength above 4095 required for longer-term institutional players and investors to follow suit.  In lieu of such strength, further and possibly accelerated losses remain expected.

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