RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

After nibbling at a new low (131.23) Fri and yesterday below 05-Mar’s 131.235 low, we’re calling Thur’s 133.005 high the top of the latest smaller-degree corrective high and the level this market is minimally required to recover above to confirm a bullish divergence in momentum and interrupt the clear and present and major downtrend.  Per such, we’re identifying 133.01 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 still-advised bearish policy and exposure. In lieu of such 133.01+ strength, the trend remains down on virtually all scales and should not surprise by its continuance or acceleration.

On a broader scale, the nicely-developing POTENTIAL for a bullish divergence in momentum is as clear in the daily chart above as the potential for a bearish divergence in momentum in 10-yr rates below is.  But a recovery above 133.01 is required to CONFIRM the bullish divergence in the contract while a close below 10-Mar’s 1.518% corrective low close is required to confirm the bearish divergence in rates.  Until and unless these short-term risk parameters are breached, the major trends from last Aug’s major high and low should not surprise by their continuance.

And keep in mind, these risk parameters at 133.01 and 1.518% are SHORT-TERM thresholds.  Their violations would only allow us to conclude the end of the portion of these trends from 27-Jan’s 137.205 high in the contract and from 27-Jan’s 1.018% low in rates.  To break the major downtrend from 05Aug20’s 140.13 all-time high, a recovery above at least 12-Jan’s 136.01 (prospective major 1st-Wave) low remains minimally required to jeopardize the impulsive integrity of a more immediate and potentially massive 3rd-wave extension down.  The analogous level in rates is 11-Jan’s 1.148% high.

From an even longer-term perspective shown in the weekly chart below, the major reversal has become obvious as a result of the expected accelerated 3rd-wave-type decline after months of peaking behavior.  It is interesting to note however that the potential for a bullish divergence in momentum is developing around the exact neighborhood of the (131.20) 38.2% retrace of the entire nearly-two-year bull from Oct’18’s 117.13 low to Aug’20’s 140.13 high.  Combined with a confirmed momentum failure above 133.01, a more extensive corrective recovery may be exposed.

These issues considered, a bearish policy and exposure remain advised with a recovery above 133.01 required for shorter-term traders to take profits and move to the sidelines and for longer-term institutional players to pare exposure to more conservative levels in order to circumvent or reduce the risk of a bigger corrective rebound.  In lieu of such strength, the trend remains down on all scales and should not surprise by its continuance or acceleration.

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