Posted on Oct 19, 2023, 07:00 by Dave Toth

In 09-Oct’s Technical Blog we identified 04-Oct’s 25.28 low as the end or lower boundary of a (4th-Wave) correction down from 19-Sep’s 27.88 high ahead of an eventual (5th-Wave) resumption of the secular bull trend above 27.88.  This count remains intact until/unless this market breaks below 25.28, our key long-term bull risk parameter.

Given Tue’s break above 09-Oct’s 27.28 high, the 240-min chart below also shows the market’s definition of a smaller-degree corrective low on 12-Oct at 26.25 that the market would now be expected to sustain gains above per a more immediate bullish count.  Especially given the market’s proximity to the extreme upper recesses of the past month’s range this week, we’re defining last week’s 26.25 low as our new short-term parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a bullish policy and exposure.

We always want to beware the resistance candidate of the upper recesses of a range.  And the market’s failure to sustain gains above 26.25 will jeopardize the impulsive integrity of a more immediate bullish count, suggesting the recovery from 04-Oct’s 25.28 low is just the b-Wave of a still-unfolding correction/consolidation from 19-Sep’s 27.88 high that could easily then expose a return to the lower recesses of the 27.88 – 25.28-range.  If the risk of a bullish position isn’t managed on a failure below 26.25, the only remaining objective bull risk parameter is 25.28.  Traders are advised to use these two levels to manage bull risk commensurate with their own personal risk profiles.

On a broader scale, the magnitude and dominance of the secular bull trend is clear in the daily (above) and weekly (below) charts with a failure below a least 25.28 required to break the uptrend from 29-Jun’s 22.06 low and also threatening the secular bull market from Apr’20’s 9.21 low that looks to be at the extreme waning stages of a massive 5-wave Elliott sequence as labeled below.  Combined with multi-month waning upside momentum and understandably historically bullish sentiment/contrary opinion levels, we believe there is a major peak/reversal environment in this market’s relative near-term future.  Currently however, we need proof of weakness below at least 25.28 to start to more objectively position for such a top.  Until/unless such weakness is proven, we anticipate a continuation of the secular bull trend to at least one more round of new highs above 27.88.

These issues considered, a bullish policy and exposure remain advised with a failure below 26.25 required for shorter-term traders to move to the sidelines and commensurately larger-degree weakness below 25.28 for longer-term commercial players to follow suit.

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