Overnight’s break below 26-May’s pivotal 13.25 larger-degree corrective confirm a bearish divergence in WEEKLY momentum and contributes to a peak/reversal count that could be major in scope.  In addition to this critical momentum failure, the weekly log scale chart of the Nov contract below also shows historically stratospheric sentiment/contrary opinion levels and an arguably complete and massive 5-wave Elliott sequence from Apr’20’s 8.26 low that rounds out the technical trifecta typical of major peak/reversal environments.  Peer these facts and observation, the market has identified 07-Jun’s 14.72 Globex day-session high as THE KEY new long-term risk parameter from which even long-term commercial players can objectively base non-bullish decisions like long-covers and new bearish exposure.  Until and unless this market recoups 14.72 needed to negate this new bearish count, we believe the market’s downside potential is indeterminable and potentially massive, spanning months or even quarters.

From an even longer-term monthly perspective below, the market’s recent proximity to the extreme upper recesses of the past 13-YEAR range would seem to contribute to a peak/reversal environment now that the market has broken it’s long-term uptrend.  At the very, very least, a continued bullish policy has been severely questioned as a result of the past month’s price action, requiring a recovery above 16.18 in the prompt contract and 14.72 in the Nov contract to mitigate.

This said, we would also remind traders that basis the Nov contract, this market has satisfied only the first two of our three reversal requirements: a confirmed bearish divergence in momentum and proof of trendy, impulsive 5-wave behavior on the initial counter-trend decline.  This leaves the door open to our third reversal requirement of 3-wave behavior on a (suspected 2nd-wave) corrective rebuttal attempt to this month’s initial (suspected 1st-Wave) decline.  Nonetheless, the daily log scale chart below shows today’s break below 26-May’s 13.25 low that breaks the major bull trend and identifies 07-Jun’s 14.72 Globex day-session high as THE high this market now needs to recoup to negate this peak/reversal count and reinstate the secular bull.  Until and unless such strength is proven, a new bearish policy is urged whereby a recovery attempt, and potentially a protracted one to the 13.89-to-14.08-area or higher (50%-to-61.8% retraces of the decline thus far), is first approached as a corrective selling/bear-hedging opportunity.

Finally, the hourly chart below details the extent and 5-wave impulsiveness of the collapse from 07-Jun’s 14.72 high.  We had to drill down to a 15-min chart to identify the tightest smaller-degree corrective high at 13.69 that we believe this market is now minimally required to recover above to arrest this initial counter-trend move down and expose that (2nd-Wave) corrective rebuttal.  Until and unless such strength is shown, the trend is down on all practical scales at this point and should not surprise by its continuance.

These issues considered, all bullish policy and exposure has been nullified and advised to be covered.  This also means at least the start of bear-hedges for producers who are inherently long.  From a trading perspective however, “chasing” bearish exposure lower on such an initial counter-trend decline typically is a poor risk/reward proposition.  Per such, we advise a neutral/sideline policy for the time being.  We will be watchful for a bullish divergence in short-term mo needed to arrest this slide and expose that suspected (2nd-Wave) rebound that could be extensive, offering day-traders a temporary opportunity from the bull side.  Overall however, we believe the major risk/reward opportunity is now from the bear side following such a corrective rebound in the weeks ahead.

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