RJO FuturesCast

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Overnight’s recovery above 12-Oct’s 14.55 high nullifies last Mon’s bearish divergence in short-term momentum discussed in Tue’s Technical Blog, chalks up the sell-off attempt to former resistance-turned-support at 13.78 as another correction and reinstates the 6-month bull trend.  As a direct result of this latest spate of strength, 12-Oct’s 13.78 low serves as this market’s latest smaller-degree corrective low and short-term but key risk parameter we expect and require the market to sustain gains above to maintain a more immediate bullish count and bullish policy.

From a longer-term perspective, it is clear that a failure below 13.78 would only allow us to conclude the end of a 5-wave uptrend from 11-Sep’s 12.44 next larger-degree corrective low.  Indeed, commensurately larger-degree below that 12.44 low remains required to, in fact, break the 6-month uptrend.  Given this risk parameter’s position back deep within the middle-half bowels of this year’s range however, it’s practicality and usefulness as a risk parameter is shot, especially given 1) the market’s proximity to the extreme upper recesses of the past couple years’ range and 2) historically frothy levels in bullish sentiment/contrary opinion not seen in at least three years.  Along with the prospect that the market might be completing the 5th-Wave of an Elliott sequence up from 28-Apr’s 10.29 low, this combination of factors cannot be ignored as a legitimate threat to the bull that we believe will become enough of a threat on an admittedly short-term momentum failure below 13.78 to warrant defensive measures.  In lieu of such sub-13.78 weakness, the trend is up on all practical scales and should not surprise by its continuance or acceleration, including a bust-out above the lower-15-handle that has capped this market for the past two years.

In sum, a bullish policy and exposure remain advised for long-term players with a failure below 13.78 required to defer or threaten this call enough to warrant moving to the sidelines.  Shorter-term traders whipsawed out of bullish exposure by last Mon’s short-term momentum failure are advised to return to a cautious bullish policy and first approach setback attempts to 14.55 OB as corrective buying opportunities with a failure below 13.78 required to negate this call and warrant its cover.  In lieu of such sub-13.78 weakness, further and possibly accelerated gains should not surprise.

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