RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Especially in light of today’s relapse thus far, shorter-term traders with tighter risk profiles are advised to tighten protective sell-stops to a level just beneath 26-Jan’s 6.16 corrective low left in the wake of the ensuing few days’ continued rally.  A failure below 6.16 will confirm a bearish divergence in momentum and break at least the uptrend from 13-Jan’s 5.85 key low and support area. But given the market’s proximity to the extreme upper recesses of a NINE MONTH range as well as the possibility that the past couple weeks’ continued rally may be the completing 5th-Wave to an Elliott sequence from 10-Sep’s 5.07 low, the market’s downside potential below 6.16 could be significant.

The list of technical elements that threaten the bull are many and unique:

  • the Mar contract’s position at the extreme upper recesses of the range that has constrained it since last May
  • waning upside momentum
  • an arguably complete or completing 5-wave Elliott sequence up from 10-Sep’s 5.07 low as labeled
  • still historically frothy levels in our RJO Bullish Sentiment Index.

Indeed, reflecting a whopping 395K Managed Money long positions to just 29.5K shorts, the current 93% reading in this Index identifies plenty of fuel for downside vulnerability IF/when the market breaks the clear and present and major uptrend.  An admittedly short-term failure below 6.16 would be of an insufficient SCALE to conclude a larger-degree top.  Commensurately larger-degree weakness below 03-Jan’s 5.84 larger-degree corrective low is required for that.  But that leaves a lot of green between our two risk parameters of 6.16 and 5.84.  And we know that every larger-degree mo failure starts with a smaller-degree failure.  Per such and especially for shorter-term traders with tighter risk profiles, a bullish policy and exposure remain advised with a failure below 6.16 required to threaten this call enough to warrant its complete cover.  And even longer-term commercial players may want to accept whipsaw risk back above the high in exchange for deeper nominal risk below 5.84 by paring bullish exposure on a failure below 6.16.  Until and unless the market breaks 6.16 however, a bullish policy remains advised.

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