RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

In last Wed’s Technical Webcast following Tue’s bearish divergence in admittedly short-term momentum, we discussed ancillary compelling evidence that warned this short-term weakness could morph into a broader peak/reversal-threat environment.  Today’s subsequent weakness below 19-Mar’s 118.10 larger-degree corrective low and key risk parameter confirms a bearish divergence in weekly momentum that provides that next larger-degree level of weakness and vulnerability that defines 08-Apr’s 125.625 high as the END of the uptrend from at least Oct’20’s 103.10 low.

The hourly chart below shows that today’s continued slide leaves Fri’s 120.15 high as the latest smaller-degree corrective high the market is required to sustain losses below to maintain a more immediate bearish count.  Its failure to do so will confirm a bearish divergence in short-term momentum that stem what we believe is only the initial (A- or 1st-Wave) decline within a broader peak/reversal process.  Per such, this 120.15 level serves as our new short-term risk parameter from which traders can base and manage the risk of non-bullish decisions like long-covers and cautious bearish punts.  And indeed, after such a monstrous 2020 -m 2021 rally from 76.60 to 125.625, a (B- or 2nd-Wave) corrective rebuttal to this initial counter-trend break would be well within the bounds of a broader peak/reversal PROCESS.

On a broader scale, it’s easy to see today’s failure below 19-Mar’s 118.10 larger-degree corrective low as breaking the uptrend from 20Oct20’s 103.10 low in the Jun contract.  Against the backdrop of the even broader uptrend from Apr’20’s 91.275 low, might this month’s relapse be a mere correction ahead of a resumption of the major bull?  Sure.  But we have two levels- 120.15 (tight) and 125.65- that the market must recoup to threaten and then confirm such a resumed bullish count.  Until and unless such strength is proven, the combination of:

  • the confirmed bearish divergence in WEEKLY momentum
  • historically frothy sentiment/contrary opinion levels, and
  • the market’s recent close proximity to the 128-to-134-area resistance that has totally repelled EVERY rally attempt over the past FOUR YEARS

is more than sufficient evidence to question the risk/reward merits of maintaining a bullish policy “up here” and warrant reversing into a new bearish policy.

These issues considered, even long-term commercial players have now been advised to neutralize all remaining bullish exposure and are next advised to first approach recovery attempts as corrective selling opportunities.  A cautious bearish policy and exposure are advised from 118.50 OB with a tight risk parameter just above 120.15, where such a recoup would expose a steeper (B- or 2nd-Wave) correction to possibly the 121.50-to-122.50-area for a preferred risk/reward sale.  In lieu of at least such 120.15+ strength, further and possibly steep losses should not surprise.  Commensurately larger-degree strength above 125.65 is required to negate this peak/reversal count and reinstate the major bull.

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