RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Overnight’s recovery above 01-Oct’s 4366 initial counter-trend high detailed in the 240-min chart below confirms a bullish divergence in short-term momentum.  This mo failure leaves yesterday’s 4273 low in its wake as the latest smaller-degree corrective low the market is now required to sustain gains above to avert a more significant correction or reversal lower and possibly resurrect the secular bull trend.  In this regard, this 4273 level serves as a mini risk parameter from which non-bearish decisions like short-covers and bullish punts can be objectively based and managed.

Stepping back a bit, the daily log scale chart below shows only a 3-wave sell-off attempt from 03-Sep’s 4550 high THUS FAR.  Left unaltered by a relapse below yesterday’s 4273 low discussed above, this 3-wave decline may be considered another corrective event consistent with the secular bull trend.  A recovery above 27-Sep’s 4472 high and short-term risk parameter remains required however to confirm a bullish divergence in DAILY momentum and contribute to a count calling for the eventual resumption of the massive bull market.  In effect and from a shorter-term perspective, we believe the market has defined 4472 and 4273 as the key directional flexion points.  The market’s current position in the middle of this range presents a relative coin flip where the risk/reward metrics of initiating directional exposure are poor.

While a recovery above 4472 would tilt longer-term directional scales back to the bull side, the fact that the market would still be below 03-Sep’s obviously pivotal 4550 all-time high and resistance could maintain the prospect of further lateral consolidation between 4550 and 01-Oct’s 4260 low for weeks or months thereafter.  But the importance of such a 4472+ recovery is that it would lessen the odds of any broader peak/reversal count and reinforce a count calling for the eventual resumption of the secular bull.

The weekly log chart below shows the magnitude of the secular bull trend and Sep-Oct’s setback that is obviously of an insufficient scale to CONCLUDE a major top.  Some measures of market sentiment/contrary opinion remain at historically frothy heights typical of major peak/reversal conditions.  We’ve also recently discussed the oddity of AAII’s Bullish Sentiment Survey wafting around historic LOWS over the past few weeks.  As the huddled masses are typically on the wrong end of the directional stick at key turning/reversal points, the extent to which this community is now bearish could warn of not only a resumption of the secular bull market, but also in an exuberant manner sufficient to suck them back in to buying/chasing bullish exposure at much higher levels.

These issues considered, shorter-term traders are advised to return to a bullish policy and first approach setback attempts to suspected near-term resistance-turned-support in the 4360-to-4350-area as corrective cautious buying opportunities with a failure below 4273 required to negate this count, warrant its cover and resurrect a broader peak/reversal threat.  Longer-term players and investors remain advised to maintain a neutral/sideline policy for the time being with a recovery above 4472 required to raise the odds of a resumed major bull trend enough to consider resumed cautious bullish exposure.

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