• Models are bearish for the next several days.

• Models identify new longs that entered the market on Monday May 12th on the break of the high at 3.75/3.8 (NGM25) - these positions are now being liquidated and selling will likely continue for next few days.

• Price levels to watch on the upside are 3.80 and 3.95 (NGM25). On the downside, stops are located at 3.4 and 3.25.

• Long liquidation amongst systematic traders continues, although the pace continues to lessen.

Models are bearish for the next several days in NGM25.

The highs at 3.75 / 3.80 were breached on May 9th and May 12th. After these highs were taken out on May 12th, the market swiftly began to collapse.

The models identify new longs that entered the market on the break of these highs, notably in the early morning on May 12th and 2pm EST on May 9th; these longs have now been exiting over the past three days.

We see a lot of stops concentrated between 3.80 and 3.95 in the June 25 futures.

On the downside, we see stops at the 3.4 and 3.25 level. Stops at both levels can be described as minor, with the 3.25 level having more stops than 3.4. We see major stops at the 3.0 level.

Our models saw new longs enter the market near the close of trading on May 9th and in the early morning hours (3 am - 6am EST) of May 12th, as the highs of 3.75 / 3.80 were broken.

These new longs have been exiting their positions almost immediately after entry. How do we know this?

Let me explain with an example from the animal kingdom. In dry weather, an elephant may spend considerable time meandering various paths in search of a water source. After much seeking, let us assume that the elephants find their water source. After their thirst has been quenched, they will then go back to their herd to alert others of their newly discovered wellspring of water. The million dollar question is - what route will they take to get back to their herd? Will they take a new route? Or will they retrace the route they took to find the water? The answer is that they will instinctively retrace the route leading them to their water source.

There is a clear learning lesson here for all of us market participants, which is that a speculator that buys a new high will also liquidate on a new low.

With this in mind - there has been unusually strong selling at each minor low over the past three days.

As I mentioned in my previous post - such behavioral patterns, as mentioned above amongst elephants, can be successfully modelled into an algorithm. After all, human beings are mammals in the purest sense, and as a result, we are prone to the same behavioral patterns as our siblings in the animal kingdom.

In my next post, I will provide an update on our medium-term outlook.

I hope all of you have a wonderful week ahead of you! If you enjoy these posts, please feel free to forward it to your fellow friends and colleagues.