RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

In Mon’s Technical Blog we discussed the market’s failure Fri below our 1598 long-term risk parameter that, given historically frothy sentiment and an arguably complete and major 5-wave Elliott sequence up, warned of a larger-degree correction or major reversal lower.  The market’s gross failure to sustain Fri’s losses below 26-Feb’s 1626.6 initial counter-trend low however renders last week’s entire sell-off attempt from 1691.7 to 1564 a 3-wave affair as labeled in the 240-min chart below.  Left unaltered by a relapse below at least Mon afternoon’s 1584.7 smaller-degree corrective low and certainly below Fri’s 1564 low, last week’s 3-wave setback cannot be ignored as a corrective structure that now exposes the secular bull trend that preceded it.  Nonetheless, 24-Feb’s 1691.7 high remains intact as THE KEY high and risk parameter this market must now recoup to CONFIRM last week’s break as a (4th-Wave) correction and reinstate the secular bull trend.

As a result of yesterday’s portion of the recovery, that Mon afternoon low at 1584.7 serves as our new short-term risk parameter the market needs to sustain gains above to maintain a more immediate bullish count.  Its failure to do so will render this week’s recovery a 3-wave and thus corrective structure and resurrect a broader peak/reversal count.  IF this broader peak/reversal count is what the market ultimately has in store, traders should be on the lookout for a bearish divergence in short-term momentum from anywhere between spot and last week’s 1691.7 high.  If/when the market produces such a mo failure, the risk/reward merits of a bearish punts could be excellent.

Taking a step back to consider the entire rally from last Nov’s 1446.2 low on a daily basis above, the extent of last week’s relapse and the extent of this week’s recovery calls into questions whether 24-Feb’s 1691.7 high is the 5th-Wave end to the broader rally or only the 3rd-Wave.  Historically frothy bullish sentiment and the Fibonacci progression fact that this rally is exactly 61.8% (i.e. 0.618 progression) of the length of the net distance of Waves-1-thru-3 (1167.1 – 1566.2) warns us to beware of a broader peak/reversal-threat environment.

Alternatively, the 3-wave appearance of last week’s relapse and Fibonacci fact that this relapse stalled at the exact (1564.1) retrace of Nov-Feb’s 1446.2 – 1691.7 rally would seem to reinforce a bullish count calling for at least one more (5th-Wave) rally to reach or exceed 24-Feb’s 1691.7 high.  Such volatility is common and expected around the ends of trends as this is the “process” of the bull slowing down from its more accelerated 3rd-wave stage before it can reverse.

These conflicting factors considered, traders are advised to move to a neutral/sideline position for the time being.  We’ve identified Mon afternoon’s 1584.7 low and 24-Feb’s 1691.7 high as the key directional triggers heading forward, but the market’s current position pretty much in the middle of this range presents poor risk/reward merits to a directional bet either way.  We will be watchful for a bearish divergence in short-term momentum somewhere along the line between spot and last week’s 1691.7 high needed to arrest the current intermediate-term uptrend and present a preferred and favorable risk/reward selling opportunity.  In lieu of such a mo failure, further gains should not surprise.

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