RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Yesterday’s break above 20-Feb’s 3.78 high provides the latest reinforcing evidence to our major base/reversal count introduced in 24-Jan’s Technical Blog and leaves Thur’s 3.72 low in its wake as the latest smaller-degree corrective low the market is now minimally required to fail below to confirm the requisite bearish divergence in momentum needed to stem the clear and present uptrend and expose an interim correction lower. In this regard this 3.72 low becomes our new short-term risk parameter from which traders can effectively rebase and managed the risk of a still-advised bullish policy. Former 3.76-area resistance is considered new near-term support ahead of further gains.
The daily log scale chart of the May contract above shows the extent and trendy, impulsive manner of the past month-and-a-half’s rally that are characteristic of the early stages of a major bull move. What we need to guard against and prepare for is an interim correction of this initial rally’s component of a broader base/reversal PROCESS. An admittedly short-term mo failure below a corrective low like 3.72 would warn of such a (2nd-wave) correction that could easily retrace 50% or more to the 3.66-area or below before the dramatic, explosive (3rd-wave) portion of the reversal higher kicks in.

Here’s the intriguing rub however: on a weekly log active-continuation chart basis below, the base/reversal began from last Nov’s 3.36 low, with Dec-Jan’s setback from 3.61 to 3.45 arguably that (2nd-wave) correction that would suggest the market is CURRENTLY IN that dramatic 3rd-wave portion of the sequence. If correct, this market may not only NOT fail below even a short-term corrective low like 3.72, but ACCELERATE HIGHER straight away.

There’s no question that the market has clearly broken the Jul’17 – Jan’18 downtrend. The only question is whether the current rally is “just another” intra-three-year-range hiccup ahead of another relapse OR the initial stage of….
…THE dramatic, protracted reversal of the 2012 – 2016 secular bear trend similar to 3Q10’s explosive rally that followed similar multi-quarter bottoming/base/reversal price action that this market has again exhibited since Oct’14 shown in the monthly log scale chart below.

These issues considered, a full and aggressive bullish policy and exposure remain advised with a failure below 3.72 required for shorter-term traders with tighter risk profiles to move to the sidelines to circumvent an interim correction and for longer-term players to perhaps pare bullish exposure to more conservative levels to preserve some dry powder for reloading at a preferred risk/reward level and condition. In lieu of at least such sub-3.72 weakness, further and possibly accelerated gains remain expected.


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