RJO FuturesCast

With the sharpness and degree of Monday’s follow through selloff from last week’s seventy-five-dollar correction we can say the market was extremely over sold and that this bounce was in order. However, one could also say that a retest of Monday’s low is a likely scenario and that this recovery bounce is another opportunity to sell gold. Keep an eye on the US Dollar. The Dollar has been capped by good resistance at .9320 recently. If the Dollar breaks out above .9320, gold will slide back to $1,700 pretty easily. Also, keep in mind that the gold market was spooked by talk of tapering and we continue to see inflationary data that should prompt gold traders to pressure the market down again.

As I like to point out, “it’s usually just a level on the chart, that turns the market around.” Having said that, I see $1,765 as “old support, becomes new resistance.” Just look at the daily chart below. If gold can manage a close above $1,775 that would be friendly to the gold bulls. A drop below $1,742 would indicate a continuation of the short term down trend. Below $1,720 is bearish.

On Monday crude oil continued last weeks slide lower down to $65.15 before closing up off its lows at $66.85 on the day. Mid-week we saw a recovery with a weekly high of $69.62 but at this time it looks like it will end the week on a weaker note. Pressure is being brought on by talks that OPEC will once again increase production and also that a ramp up in Covid outbreaks will slow the demand side of things. Despite these pressures we saw Sept crude bounce off support at $65 and trade back to the middle of the $65-$75 range. There are some global demand discrepancies between OPEC and the International Energy Agency which is causing the market to have some uncertainty. US production also remains lower than normal. Resistance comes in right above the $70 level and a breakthrough of that is needed to see crude oil push back to recent highs of $75. If wider global shut downs due to Covid or increased production from OPEC nations come to fruition, expect to see lower trade back down with $65 and $61 as the next downside targets.

On the tiniest of scales, yesterday's recovery above 04-Aug's 178.65 initial counter-trend high detailed in the 240-min chart below confirms a bullish divergence in momentum.  On the heels of late-Jul's relative plunge, early-Aug's piddly recovery attempt falls well within the bounds of a mere corrective hiccup ahead of a resumption of this relative plunge.  Nonetheless, until or unless mitigated by a relapse below 02-Aug's 171.60 low, further corrective rebound OR the resumption of the secular bull trend are expected.  Per such, this 171.60 level serves as our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed by shorter-term traders with tighter risk profiles.

The compelling thing about last week's 171.60 low and admittedly short-term risk parameter is that it comes against the backdrop of a massive, arguably accelerating secular bull trend where the relapse from 26-Jul's 215.20 high can, at this point, only be considered another correction within the secular bull.  Against the backdrop of this secular bull trend, the daily log scale chart above shows the area marked by the (170.50) 61.8% retrace of Jul's 147.65 - 215.20 rally and 168.65 former resistance-turned-support as a logical support candidate.  As yesterday's bullish divergence in short-term momentum  rejected/defined a level (171.60) just above this pivotal area, an acute risk/reward opportunity from the bull side is presented.  For IF late-Jul's exaggerated relapse/correction ended at 171.60, a resumption of the secular bull trend to new highs above 215.20 would be expected.  That's quite the reward for a risk to levels just below 171.60.

From an even longer-term perspective, the monthly log chart below shows the magnitude of this secular bull trend.  MINIMALLY, commensurately larger-degree weakness below 06-Jul's 147.65 larger-degree corrective low remains required to break even the portion of the bull from Nov'20's 102.15 low, let alone threaten the 27-month secular bull trend.

These issues considered, shorter-term traders whipsawed out of bullish exposure following 30-Jul's bearish divergence in short-term momentum are advised to return to a bullish policy and exposure from the 178.65-area OB with a failure below 171.60 required to negate this specific all and warrant its cover.  Longer-term commercial players remain advised to maintain a bullish policy with a failure below 168.65 required to defer or threaten this call enough to warrant its cover.  In lieu of weakness below at least 171.60 and preferably below 168.65, a resumption of the secular bull trend is anticipated.

Posted on Oct 14, 2022, 07:42 by Dave Toth

On the heels of mid-Sep-to-early-Oct's steeper, accelerated, 3rd-wave-looking recovery, the past week-and-a-half's boringly lateral chop is first considered a corrective/consolidative event that warns of a continuation of the uptrend that preceded it to new highs above 04-Oct's 891.0 high.  This count remains consistent with our broader base/correction/recovery count introduced in 13-Sep's Technical Blog following that day's bullish divergence in short-term momentum above 07-Sep's 809.5 minor corrective high detailed in the hourly chart below.

The important takeaway from this month's lateral, sleepy price action is the definition of Wed's 851.5 low as the end or lower boundary of a suspected 4th-Wave correction.  A failure below 851.5 will confirm a bearish divergence in daily momentum and defer or threaten a bullish count enough to warrant non-bullish decisions like long-covers.  A failure below 851.5 will not necessarily negate a broader bullish count, but it will threaten it enough to warrant defensive measures as the next pertinent technical levels below 851.5 are 13-Sep's prospective minor 1st-Wave high at 813.8 and obviously 08-Sep's 766.0 low.  And making non-bullish decisions "down there" is sub-optimal to say the least.  Per such, both short- and longer-term commercial traders are advised to pare or neutralize bullish exposure on a failure below 851.5, acknowledging and accepting whipsaw risk- back above 04-Oct's 891.0 high- in exchange for much deeper and sub-optimal nominal risk below 766.0.

On a broader scale, the daily log scale chart above shows the developing potential for a bearish divergence in daily momentum that will be considered confirmed below 851.5.  This chart also shows the past month's recovery thus far stalling in the immediate neighborhood of the (888.0) Fibonacci minimum 38.2% retrace of Apr-Sep's entire 1128 - 766 decline).  COMBINED with a failure below 851.5, traders would then need to be concerned with at least a larger-degree correction pf the past month's rally and possibly a resumption of Apr-Sep's major downtrend.

Until and unless the market fails below 851.5 however, we would remind longer-term players of the key elements on which our bullish count is predicated:

• a confirmed bullish divergence in WEEKLY momentum (below) amidst
• an historically low 11% reading in out RJO Bullish Sentiment Index and
• a textbook complete and major 5-wave Elliott sequence down from 29-Apr's 1128 high to 08-Sep's 766.0 low.

Thus far, the market is only a month into correcting a 4-MONTH, 32% drawdown, so further and possibly protracted gains remain well within the bounds of a major (suspected 2nd-Wave) correction of Apr-Sep's decline within an even more massive PEAK/reversal process from 17-May's 1219 high on an active continuation basis below.

These issues considered, a bullish policy and exposure remain advised with a failure below 851.5 required to defer or threaten this call enough to warrant moving to a neutral/sideline position.  In lieu of such weakness, we anticipate a continuation of the past month's rally to new highs and potentially significant gains above 891.0.

After weeks of consolidation the corn market finally broke out yesterday when the USDA released its Supply/Demand Report and Crop Production Report. Last week I advised that the “real” would probably come from Thursday Reports, that proved to be the case. USDA lowered its yield from 179.5 to 174.6 which was below the range of estimates hence the strong move higher. Today’s price action has September corn trading inside yesterday’s daily range. I would expect the market to continue to push higher over the next week as the market carves out a new range now that we have better insight to the yield reduction. Short-term technical indicators have turned up suggesting it could be time to be long, couple this with the bullish fundamental news we received yesterday, and the bulls have a lot to be happy about. With that said, be cautious as the large trading ranges could come back into play and easily push “weak” longs out of the market.

In last week’s article I advised the key numbers to watch were $5.81 ½ on the upside and $5.19 ½ on the downside. Well, yesterday the market surged through $5.81 ½. This signifies a strong upside technical breakout in my opinion and should start the market on a new

I would suggest using an option strategy to manage your futures position risk or an outright option strategy. Implied option volatility recently came down but is still relatively high compared to historical vol levels. You may want to incorporate some short options into your strategy in a calculated risk manner such as bull or bear option spreads. I have 25 years of grain market experience, please feel free to call me at 1-800-367-7290 for more details or to discuss in depth trading strategies. Also be sure to check out my past weekly grain market updates posted on our website.

Posted on Nov 08, 2022, 07:51 by Dave Toth

In Fri's Technical Webcast we identified a minor corrective low at 2.6328 from Thur as a mini risk parameter the market needed to sustain gains above to maintain a more immediate bullish count.  The 240-min chart below shows the market's failure overnight below this level, confirming a bearish divergence in very short-term momentum.  This mo failure defines Fri's 2.8172 high as one of developing importance and a parameter from which very short-term traders can objectively base non-bullish decisions like long-covers.

Given the magnitude of the past three weeks' broader recovery however, this short-term momentum failure is of an insufficient scale to conclude anything more than another correction within this broader recovery from 26-Sep's 2.1877 low.  Indeed, overnights failure below 2.6328 only allows us to conclude the end of the portion of the month-and-a-half rally from 31-Oct's 2.4822 next larger-degree corrective low.  2.4822 is the risk parameter this market still needs to fail below to break the uptrend from 18-Oct's 2.3526 low while this 2.3526 low remains intact as the risk parameter this market needs to fail below to break the month-and-a-half uptrend.  From an intermediate-to-longer-term perspective, this week's setback falls well within the bounds of another correction ahead of further gains.  This is another excellent example of the importance of technical and trading SCALE and understanding and matching directional risk exposure to one's personal risk profile.

The reason overnight's admittedly minor mo failure might have longer-term importance is the 2.8172-area from which it stemmed.  In Fri's Technical Blog we also noted the market's engagement of the 2.8076-to-2.8159-area marked by the 61.8% retrace of Jun0-Sewp's 3.2758 -2.1877 decline and the 1.000 progression of Sep-Oct's initial 2.1877 - 2.6185 (suspected a-Wave) rally from 18-Oct's 2.3526 (suspected b-Wave) low.  We remind longer-term players that because of the unique and compelling confluence of:

• early-Aug's bearish divergence in WEEKLY momentum amidst
• historically extreme bullish sentiment/contrary opinion levels in our RJO Bullish Sentiment Index
• an arguably complete and massive 5-wave Elliott sequence from Mar'20's 0.4605 low to Jun's 4.3260 high (as labeled in the weekly log active-continuation chart below) and
• the 5-wave impulsive sub-division of Jun-Sep's (suspected initial 1st-Wave) decline

The recovery attempt from 26-Sep's 2.1877 low is arguably only a 3-wave (Wave-2) corrective rebuttal to Jun-Sep's decline within a massive, multi-quarter PEAK/reversal process.  Now granted, due to the magnitude of 2020 -2022's secular bull market, we discussed the prospect for this (2nd-Wave corrective) recovery to be "extensive" in terms of both price and time.  A "more extensive" correction is typified by a retracement of 61.8% or more and spanning weeks or even months following a 3-month decline.  Per such, the (suspected corrective) recovery from 26-Sep's 2.1877 low could easily have further to go, with commensurately larger-degree weakness than that exhibited this week (i.e., a failure below at least 2.4822) required to consider the correction complete.  Indeed, the daily log chart above shows the market thus far respecting former 2.6185-area resistance from 10-Oct as a new support candidate.

These issues considered, very shorter-term traders have been advised to move to a neutral/sideline position following overnight's momentum failure below 2.6328, with a recovery above 2.8172 required to negate this call, reaffirm the recovery and re-expose potentially significant gains thereafter.  For intermediate- and longer-term players, a bullish policy and exposure remain advised with a failure below 2.4822 required to threaten this call enough to warrant neutralizing exposure.  We will be watchful for another bearish divergence in momentum following a recovery attempt that falls short of Fri's 2.8172 high that would be considered the next reinforcing factor to a count calling that 2.8172 high the prospective end to the month-and-a-half 2nd-Wave correction.  In lieu of such, a resumption of the current rally to eventual new highs above 2.8172 should not surprise.