Technicals, February 23, 2012; 7:35am
The 240-min chart below shows that the market's recovery above 17-Feb's 130.315 high confirms a bullish divergence in momentum. This is a technical fact that defines Tue's 130.12 low as the end to at least the decline from 15-Feb's 131.245 high. Minimally, a correction of this 131.245 - 130.12 decline is exposed and a failure below 130.12 is required to confirm the end of this currently suspected bear-market correction and resumption of the past month's broader developing decline. In this regard, the market has defined 130.12 as a short-term but objective parameter around which to base interim non-bearish decisions like short-covers and cautious bullish punts.
There are two main technical reasons we are concerned about a major peak/reversal threat: waning upside momentum shown in the weekly chart below accompanied by historic levels of bullish sentiment accorded this market that have preceded major corrections or reversals lower in the past. The recent 77% reading in the Bullish Consensus measure of market sentiment (www.marketvane.net) indicates the same amount of frothy sentiment that accompanied last Sep-Oct's sharp 5-point correction and Nov'10's major reversal lower. And the market's confirmed bearish divergence this month below 130.18 renders sentiment an applicable technical tool currently and for as long as the market sustains losses below recent corrective highs alike 131.25.
In sum, a bearish policy remains advised for longer-term players with strength above 131.25 required to threaten this view enough to warrant moving back to a neutral/sideline position. As a result of a confirmed bullish divergence in short-term momentum however, shorter-term traders with tighter risk profiles have been advised to pare or neutralize their bearish exposure and move to a neutral/sideline position, with resumed weakness below 130.12 now required to resume a bearish policy and exposure. And should the market relapse below 130.12, traders are warned that such reaffirmation of this developing downtrend could lead to accelerated, even relentless losses thereafter.
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