RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

While the 240-min chart below shows the past week’s relapse only retracing about 61.8% of mid-to-late-Jan’s 136.01 – 123.205 rebound thus far, yesterday and overnight’s break below 21-Jan’s 136.235 low reinforces a broader bearish count calling that rebound a 3-wave structure as labeled.  Left unaltered by a recovery above at least Mon’s smaller-degree corrective high at 137.095 and preferably 27-Jan’s 137.205 high, this 3-wave recovery is considered a corrective/consolidative affair that warns of a resumption of the 5-month downtrend that preceded it.  Per such, we are identifying 137.10 and 137.21 as our new short- and long-term risk parameters from which a bearish policy and exposure can be objectively rebased and managed.

On a broader scale, only a glance at the daily chart of the contract above and 10-yr yields below is needed to see that the dominant trend remains down.  Given the extent of the past week’s relapse in prices and recovery in rates, a recovery above at least 137.21 in the contract and a relapse below 27-Jan’s 1.018% low in rates is required to threaten this trend and expose bigger corrections the other way.  Until and unless such strength (r weakness s rates) is proven, these 5-month trends should not surprise by their continuance or acceleration.

Finally and again, from a very long-term perspective, the combination of:

  • a confirmed bearish divergence in WEEKLY momentum amidst
  • historically frothy sentiment/contrary opinion and
  • and arguably complete and major 5-wave Elliott sequence up from Oct’18’s 117.13 low

presents the compelling and unique peak/reversal-threat metrics not seen since that that warned of and accompanied Jul’16’s major peak and reversal.  These metrics are the opposite of those that warned of and accompanied 2018’s major base/reversal process that spanned nearly a year before the reversal took hold in a more obvious and trendy way.  Today, we can look back on peak/reversal behavior that arguably began in Mar’20 and may now see the more obvious, trendy behavior lower.

In sum, a bearish policy and exposure remain advised with a recovery above 137.10 required for shorter-term traders to step aside and commensurately larger-degree strength above 137.21 for longer-term institutional players to follow suit.  In lieu of such strength, further and possibly protracted losses straight away should not surprise.

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