Posted on Dec 14, 2023, 07:38 by Dave Toth

Overnight’s break below Tue’s 21.48 low reaffirms the developing downtrend with the important by-product being the market’s definition of yesterday’s 23.12 high as the latest smaller-degree corrective high this market is now minimally required to recoup to confirm a bullish divergence in short-term momentum, arrest the clear and present downtrend and expose a corrective rebuttal that could be extensive in scope.  Until and unless such strength is shown, the trend remains down on all scales and should not surprise by its continuance or acceleration straight away.

The extent and 5-wave impulsiveness of the past five weeks’ decline is clear in the daily chart below and is a key element in our peak/reversal count that we believe will be multi-quarter or multi-year in scope.  This said, peak/reversal processes to a secular bull trend typically include (2nd-wave) corrective rebuttals to the initial (1st-wave) decline that could be extensive in terms of both price and time.  Herein lies the importance of even a shorter-term bullish divergence in momentum above a smaller-degree corrective high like 23.12.  Until/unless such specific 23.12+ strength is shown however, the trend remains clearly down and should hardly surprise by its continuance.

On a long-term scale, our major peak/reversal count remains predicated on:

  • a confirmed bearish divergence in MONTHLY momentum as a result of this week’s break below 29-Jun’s 21.88 corrective low (below)
  • the market’s rejection of the upper-quarter of its massive but lateral historical range
  • a textbook complete 5-wave Elliott sequence from Sep’22’s 17.19 low to 07-Nov’s 28.14 high
  • an arguably complete and massive 5-wave Elliott sequence from Apr’20’s 9.21 low to 07-Nov’s 28.14 high
  • the rally from Sep’22’s 17.19 low coming within 21 ticks of the (28.35) 0.618 progression of Apr’20 – Nov’21’s preceding 9.21 – 20.69 rally on a weekly log basis (above)
  • historically extreme bullish sentiment/contrary opinion levels.

This is a unique and compelling list of technical facts that warns of a peak/reversal process of a scale that ended the 1999- 2011 secular bull market and exposed a new secular bear trend that at least ended in 2020 and may actually be resuming since the 2020 – 2023 bull failed to take out 2011’s 36.08 high.  This could mean a return to 2020 levels around a 9-cent handle OR LOWER in the YEARS ahead.  To negate this long-term bearish count, all the bull needs to do is take out last month’s 28.14 high.

These issues considered, a bearish policy and exposure remain advised with a recovery above 23.12 required to defer this call enough and expose a larger-degree corrective recovery to warrant moving to a neutral/sideline position temporarily, or even an interim cautious bullish stance.  In lieu of such 23.12+ strength, further and possibly steep losses remain expected.

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