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Tighten Cattle Bull Risk “Up Here”

Posted 10/24/2019 10:07AM CT | RJO Market Insights

Yesterday’s continuation of the past month-and-a-half’s impressive, impulsive uptrend above last week’s 114.425 high nullifies the bearish divergence in very short-term momentum discussed in last Fri’s Technical Blog and reaffirms our major base/reversal count introduced in 17-Sep’s Technical Blog.  This continued strength leaves last Fri’s 112.25 low in its wake as the latest smaller-degree corrective low and new short-term but key risk parameter from which a still-advised bullish policy can be objectively rebased and managed.

The market’s inability to sustain gains above 112.25 will confirm a bearish divergence in daily momentum (above) and likely mean a complete 5-wave Elliott sequence up from 09-Sep’s 98.20 low that would then be prone to a correction of this rally.  The weekly chart below of the Dec contract shows that this market has come a long way pretty quickly.  And as long as the market sustains the uptrend, that’s OK, it can continue indefinitely.  Indeed, the weekly chart below also shows market sentiment/contrary opinion levels nowhere near frothy levels typical of broader peak/reversal-threat environments.

This weekly chart also shows NO levels of any technical merit above the market shy of Apr’s 124.175 high.  This doesn’t mean we’re forecasting a move to 124, but rather that ANY amount of upside potential is currently in play until and unless the market stems the clear and present uptrend with a bearish divergence in mo below a corrective low like 112.25, including a run at 124.

Finally, and a long-term active-continuation basis, the weekly log chart above and monthly log chart below show the unique and compelling combination of:

  • a bullish divergence in WEEKLY momentum amidst
  • 14-YEAR lows/pessimism in the sentiment/contrary opinion indicators and
  • the market’s gross failure to sustain Sep losses below THREE YEARS of support around the 96-handle-area.

These are the specific technical facts on which our major base/reversal count is predicated.  Trying to find flies in the bullish ointment however, these charts show the market’s return to the middle of the middle-half bowels of the past three years’ range that defines the middle-half subset of the range that has constrained prices for the past 10 YEARS.  And we always are concerned with the higher odds of aimless whipsaw risk typical of such range-center environs that warrant a more conservative approach to risk assumption.  Such an approach, we believe, places an emphasis on tight but objective risk parameters like 112.25.  Until and unless the market fails below 112.25, the trend is up on all practical scales and should not surprise by its continuance or acceleration.

In sum, a bullish policy and exposure remain advised with a failure below 112.25 required to defer or threaten this call enough to warrant moving to a neutral/sideline position and circumventing the depths unknown of what could be a more extensive corrective rebuttal lower.  In lieu of such sub-112.25 weakness, further and possibly accelerated gains remain expected.

RJO Market Insights

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