RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Oct 11, 2022, 09:50 by Dave Toth

By poking above the past month’s resistance yesterday, the market has reaffirmed an uptrend that spans 2-1/2-months and $1.44, a 25% gain from 22-Jul’s 5.62 low.  Still more than a buck-and-a-half from 16-May’s 7.66 high however, this recovery remains within the bounds of a (2nd-Wave) CORRECTION within a massive, multi-quarter peak/reversal process.  If this ultimately bearish count is wrong, all the bull needs to do “up here” is sustain trendy, impulsive behavior higher.  It proves such bullish behavior by sustaining gains above former resistance-turned-support and especially prior corrective lows.

In the hourly chart below, yesterday’s rally broke resistant highs ranging from 6.91-to-7.00.  Since broken, this now former resistance should serve as a new support candidate.  A failure below this area won’t necessarily threaten the 2-1/2-month rally, but it’d be a start.  Per such, we’ve identified a minor high at 6.84 from Fri, the failure below which would jeopardize the impulsive (i.e. 5-wave) integrity of the latest portion of the rally from 26-Sep’s 6.65 Globex day-session low and key larger-degree corrective low.  As a result, we’re defining 6.84 as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a continued bullish policy and exposure.

Stepping back a scale, the daily log chart below shows yesterday’s resumption of the 2-1/2-month uptrend but with momentum that’s clearly waning.  A failure below 26-Sep’s 6.65 Globex day-session low will confirm a bearish divergence in momentum, break the uptrend and contribute to our major peak/reversal-threat count.  Per such, we’re defining this 6.65 level as our new key bull risk parameter around which directional biases and exposure can be toggled by longer-term commercial players.  A failure below 6.65 cannot be ignored as the first phases of a (major 3rd-Wave) resumption of May-Jul’s downtrend to eventual new lows below 5.62.

Complicit in this major peak/reversal-threat environment are historically extreme levels in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC.  Indeed, at a frothy 91% level reflecting a whopping 272K longs to just 28K shorts, this is ample fuel for downside vulnerability, just as it was back in May that led to a 2-month, 26% meltdown.  As the market has yet to break the current uptrend however, sentiment/contrary opinion is not an applicable technical tool.  A failure below 6.65 however, that would confirm a bearish divergence in WEEKLY momentum, WOULD render sentiment an applicable factor in a peak/reversal threat that could have long-term bearish implications.

These issues considered, a bullish policy and exposure remain advised with a failure below 6.84 required for shorter-term traders to move to the sidelines and commensurately larger-degree weakness below 6.65 for commercial players to not only follow suit, but also reverse into a new bearish policy and exposure.  In lieu of such weakness, further gains should not surprise, with the 7.00-to-6.91-area expected to hold as support.

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