RJO FuturesCast

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Overnight’s break below the past month’s 72.22-to-72.15-range key support not only confirms our suspicions from 07-Jun’s Technical Blog that the last week’s of May’s recovery attempt was a 3-wave and thus corrective affair, but also a broader peak/reversal-threat environment that could be major in scope.  As a direct result of this resumed weakness detailed in the 240-min chart below, the market has identified Fri’s 73.19 high in the now-prompt Dec contract as the latest smaller-degree corrective high and new short-term risk parameter it is now minimally required to recoup to threaten a broader bearish count.  Former 72.15-to-72.50-range support would be expected to hold as new resistance heading forward.

Cotton 240 min Chart

Cotton Daily Chart

TO THIS POINT the nearly 3-month decline in the Dec contract from 20-Mar’s 75.72 high is only a 3-wave affair looking at the daily chart above.  And with the market still above a ton of former price action from 4Q16 it would be premature to totally rule out the ultimately bullish prospect that the sell-off attempt from that Mar high is a correction ahead of an eventual resumption of the 16-month uptrend.  HOWEVER…..

The market’s gross failure to sustain May’s emotional spasm above the 79-handle on a weekly log active-continuation chart basis above confirms a bearish divergence in WEEKLY momentum.  COMBINED with historically frothy bullish sentiment according to RJO’s proprietary Bullish Sentiment Index the market could now be vulnerable to extensive weakness straight away with nearly thee months of peak/reversal PROCESS now behind it.

These issues considered, a new bearish policy is advised from at-the-market (72.00) OB with strength above 73.20 minimally required to defer or threaten this call and warrant its cover.  In lieu of such 73.20+ strength further and possible extensive losses are anticipated straight away.

Cotton Weekly Chart

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