RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

On the heels of yesterday’s relapse and with overnight trading putting the market on the verge of slipping below 23-Jul’s 5.27 corrective low that would confirm another bearish divergence in short-term momentum, we believe the market is reinforcing our peak/correction/reversal count introduced in 20-Jul’s Trading Strategies Blog following that day’s initial momentum failure below 14-Jul’s 5.26 corrective low.  That initial mo failure defined 15-Jul’s 5.52 as the end of a textbook 5-wave Elliott sequence up from 26-Jun’s 4.71 low and start of at least a corrective rebuttal of this 4.71 – 5.52 rally.  But for longer-term reasons we’ll discuss below, the prospect of a more protracted move south cannot be ignored.

Today’s momentum failure is important because it follows what we suspect is a (B- or 2nd-Wave) corrective retest of 15-Jul’s 5.52 high within a broader peak/correction/reversal process that, if correct, warns of a resumption of mid-Jul’s initial (A- or 1st-Wave) break to levels below 20-Jul’s 5.17 low, and possibly well below that low.  A key takeaway from yesterday and overnight’s relapse is the market’s definition of Fri’s 5.44 high as the latest smaller-degree corrective high that serves as our new short-term risk parameter from which traders can rebase and manage the risk of an advised bearish policy and exposure from 5.35 OB recommended in 20-Jul’s Trading Strategies Blog.  A recovery above 5.44 would negate this specific bearish count and suggest a more shallow, lateral consolidation within the context of a broader bull move from 26-Jun’s 4.71 low.  Until such 5.44+ strength is shown however, we believe this market has become vulnerable to another intra-range correction to at least levels below 5.17 and possibly below 4.71.

A key contributing factor to at least an interim peak/correction count and possibly a more protracted, if intra-range plunge is the market’s recent foray into the upper-quarter of the massive lateral range between 3.87 and 5.93 that has imprisoned it for the past FOUR YEARS.  The weekly log chart below shows this range and the market’s inability to penetrate its upper-quarter on every assault.  Levels above approximately 5.35 have proven to provide excellent risk/reward conditions from which to SELL this market, not buy it, AFTER the market stems an uptrend with a bearish divergence in momentum like in did on 20-Jul that defines a specific and objective risk parameter from which to do so.

In sum, a bearish policy and exposure from 5.35 OB recommended in 20-Jul’s Trading Strategies Blog remains advised with a recovery above 5.44 required to negate this specific call and warrant its cover.  In lieu of such 5.44+ strength, we anticipate resumed losses to at least levels below 5.17, and possibly below 4.71.

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