RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Posted on Sep 12, 2022, 07:48 by Dave Toth

Not the highest inflation rate in 40 years nor quality-flight from a threatening equity market bear or war in Ukraine were enough to provide a bid to the gold and silver markets this year.  Rather, the metals’ bane was the secular bull trend in the USD.  In Fri’s Technical Webcast, we introduced some compelling BASE/reversal-threat elements in the euro and British pound, with the result being the gold and silver markets confirmation of bullish divergences in admittedly only short-term thus far.  But amidst historically bearish sentiment/contrary opinion levels and arguably complete and major 5-wave Elliott sequences down this year, the gold and silver markets may currently be laying the initial ground work for broader base/correction/reversal counts that could have long-term bullish implications.

DEC GOLD

The 3240-min chart below shows today’s clear break above the past week’s 1737.4-area resistance hat confirms a bullish divergence in short-term momentum.  This mo failure defines 01-Sep’s 1699.1 low as one of developing importance and, as we’ll discuss below, possibly the 5th-Wave END of a major 5-wave Elliott sequence down from 08-Mar’s 2078.8 high.  Today’s continued recovery also defines 07-Sep’s 1701.7 low as the latest smaller-degree corrective low this market is now require to fail below to render the recovery from 1699.1 a 3-wave and thus corrective affair that would resurrect this year’s major bear trend.  Until and unless such sub-1701.7 weakness is shown, there’s no way to know the rally from 1701.7 isn’t the 3rd-Wave of an eventual 5-wave rally as the INITIAL wave in a broader reversal higher.  Per such, 1701.7 is considered a mini but important bull risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

From a longer-term perspective however and as is typically the case early in correction-vs-reversal environments, the technical and trading issue of SCALE is now in play.  CLEARLY, the past week’s recovery is of a grossly INsufficient scale thus far to conclude anything more than another interim corrective hiccup within this year’s major downtrend.  Commensurately larger-degree strength above 25-Aug’s 1778.8 larger-degree corrective high remains required to break even the portion of this year’s downtrend from 10-Ag’s 1824.6 high, let alone threaten this year’s massive bear from Mar’s 2078.8 high.  However, the combination of:

  • the market’s recent proximity to the extreme lower recesses of the past couple months’ range
  • the market’s proximity to the extreme lower recesses of the past couple YEARS’ range
  • historically bearish sentiment/contrary opinion levels we haven’t seen in over THREE YEARS and
  • an arguably complete 5-wave Elliott sequence from 08-Mar’s 2078.8 high labeled above

is unique and compelling with respect to a longer-term BASE/REVERSAL-THREAT ENVIRONMENT.

If such a bullish threat is going to evolve into reality, then, quite simply, the bull needs to BEHAVE LIKE ONE by sustaining trendy, impulsive 5-wave behavior to the upside and laboring in a 3-wave corrective manner on relapse attempts.  Herein lies the importance of identifying directional risk parameters like 1778.8 on the upside and last week’s 1701.7 low on the downside.

These issues considered, longer-term commercial players remains advised to maintain a cautious bullish policy with a failure below 1701.7 required to defer or threaten this call enough to warrant paring or neutralizing exposure.  Shorter-term traders with tighter risk profiles are advised to cover recently recommended cautious bearish exposure and move to a cautious bullish policy and exposure with a failure below 1701.7 required to negate this call and warrant its cover.  In lieu of a failure below 1701.7, further and possibly accelerated gains are anticipated.

DEC SILVER

The silver market’s recover above both 06-Sep’s 18.465 initial counter-trend high and corrective highs at 18.80 and 19.345 is even more impressive, confirming bullish divergences in momentum that break the portion of this year’s downtrend from 15-Aug’s 20.87 larger-degree corrective high.  The past few days’ accelerating strength leaves smaller-degree corrective lows in its wake at 18.48 and especially 17.74 that it would fully be expected to sustain gains above per a more impulsive 5-wave rally expected of the initial portion of a broader reversal higher.  Per such, 18.48 and 17.74 serve as our new mini and short-term risk parameters from which non-bearish decisions like short-covers and new bullish punts can be objectively based and managed.

From a longer-term perspective, 15-Aug’s 20.87 larger-degree corrective high still looms as THE level that this market needs to recoup to, in fact, break not only this year’s major downtrend from 08-Mar’s 27.495 high, but to also threaten the secular bear market from Feb’21’s 30.35 high shown in the weekly log chart below.  However, this weekly chart also shows understandably historically bearish sentiment levels that, given at least some semblance of a developing bottom via today’s bullish divergence in short-term mo, are arguable and applicable elements typical of major base/reversal environments.

These issues considered and while acknowledging commensurately larger-degree strength above 20.87 remains required to confirm a major base/reversal count, traders have been advised to neutralize any/all previously recommended bearish exposure and move to a neutral/sideline position for the time being, as chasing (suspected) initial counter-trend strength offer poor risk/reward merits.  Rather, we advise traders to wait for and require proof of 5-wave impulsive behavior higher in the week(s) ahead AND a likely subsequent 3-wave corrective setback thereafter for a preferred risk/reward opportunity from the bull side.  For those who can’t or prefer not to wait on bullish exposure, 18.48 and/or 17.74 serve as your bull risk parameters.  Until and unless such weakness is shown however, further and possibly accelerated gains should not surprise in the period immediately ahead.

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