Posted on Jan 08, 2024, 10:40 by Dave Toth

Today’s clear, impulsive break below 06-Dec’s 4098 corrective low and our short-term but key risk parameter reinforces a peak/reversal count/warning we discussed in 03-Jan’s Technical Blog and leaves highs in its wake at 4274 and especially 4343 that this market is now required to recoup to render the past couple weeks’ sell-off attempt another 3-wave and thus corrective affair within this market’s massive, nearly-24-YEAR secular bull market.  Per such, we’re identifying 4274 and 4343 as our new mini and short-term but key parameters from which non-bullish decisions like long-covers and bearish punts can be objectively based and managed.

On a broader scale, the combination of:

  • a confirmed bearish divergence in daily momentum (above) that
  • breaks at least Oct-Dec’s uptrend from 3373 amidst
  • understandably historically extreme bullish sentiment and
  • an arguably complete and textbook 5-wave Elliott sequence up from Sep22’s 2192 low

is unique and compelling and warns that 26-Dec’s 4343 high may have completed the secular bull market and exposed the embryonic stage of a peak/reversal process that could be massive in scope, possibly ushering in the next multi-YEAR secular bear market.

OF COURSE, we cannot conclude a major reversal from proof of such minor weakness.  But we CAN conclude recent highs at 4274 and especially 4343 as specific flexion points from which the risk of non-bullish action can be objectively based and managed.  Indeed, the list of peak/reversal elements above is identical to that that warned of and accompanied the sugar market’s 29% meltdown from late-Nov and prospective start to a major peak/reversal process.

We’ve identified 26-Dec’s 4343 high as a relatively tight but KEY bear risk parameter in the navigation of a potentially major reversal process.  This is because the secular bull market is so monstrous that weak1ness below at least 06-Oct’s 3373 larger-degree corrective low remains required to break even Sep’22 – Dec’23’s portion of the bull, let alone reverse a 24-YEAR behemoth.  But such a sub-3373 bear risk is grotesquely impractical for even long-erm commercial players.  They are better advised to neutralize al bullish exposure as a result of today’s mo failure below 4098 and acknowledge and accept whipsaw risk back above 4343 in exchange for egregious nominal risk below 3373.

Lastly, the monthly (above) and quarterly (below) log scale charts show the massiveness of the secular bull market that dates from 4Q2000’s 691 low.  Against this backdrop, there is NO WAY we can CONCLUDE an end to this secular bull.  Again, all we can conclude are some microscopically small parameters at 4274 and especially 4343 from which non-bullish action can now be objectively based and managed.  We would add however that since 2020’s COVID depths, a number of commodities exploded to multi-year and in some cases all-time highs that they grossly failed to sustain and reversed into new multi-quarter secular bear markets.  While it would be foolish to conclude a major reversal lower at this very early juncture, it would also be foolish to ignore the possibility of such given the technical elements listed above.

These issues considered, all previously recommended bullish policy and exposure have been nullified and traders are advised to move to a neutral-to-cautiously-bearish stance with a recovery above at least 4274 and preferably 4343 required to threaten and then negate this call.  Until/unless such strength is proven, further and possibly major losses should not surprise.

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.