Overnight's continuation of the past three weeks' impressive rally above Tue's 3.367 high leaves Tue's 3.277 low in its wake as the latest smaller-degree corrective low and new short-term risk parameter the market is now required to sustain gains above to avoid confirming a bearish divergence in momentum. Such a mo failure would stem the clear and present uptrend and expose at least a larger-degree correction lower, and possibly a more significant reversal lower. Former 3.350-to-3.360-area resistance is considered new near-term support ahead of further gains.
This tight but objective risk parameter at 3.277 may prove very handy as we try to discern exactly what the past few weeks' recovery is. As the Jan contract remains a good 25-cents below its 18-Oct 3.675 high, the prospect of a major PEAK/reversal process from that high remains intact. On an active-continuation basis however, the weekly log scale chart below shows this week's break above Oct's 3.366 high in the then-prompt Nov contract that re-exposes 2016's major reversal higher after an exact 38.2% retrace of Mar-Oct's 1.611 - 3.366 rally.
IF the past few weeks' rally is a big, corrective "falsie" and a broader peak/reversal process is what the market has in store, then somewhere along the line and below 18-Oct's 3.675 high in the Jan contract this market has got to stem the clear and present uptrend with a momentum failure. A failure below Tue's 3.277 corrective low may be of too small a scale to conclude the end of this recent impressive rally. But at the very least such a mo failure would reject/define a specific high from which any non-bullish decisions like long-covers and cautious bearish punts would then be able to be objectively based and managed. In lieu of such sub-3.277 weakness there is no objective alternative for the moment then to go with the rally.
Long-time readers of our analysis know of our disdain for merely derived technical levels like trend lines, various "bands", the ever-useless moving averages and even the vaunted Fibonacci relationships we cite often in our analysis. Such derived levels never have been a reliable, objective reason to buck a clear and present trend, AND THEY NEVER WILL, without an accompanying momentum failure needed to, in fact, break that trend. Per such, traders are urged to take the Fibonacci post below with a grain of salt until and unless the market fails below at least 3.277.
The monthly log scale chart below shows the market's encroachment on the 3.441 level that would make the rally from this year's 1.611 low from 07-Mar 61.8% (i.e. 0.618 progression) of the length of 2012-14's prior 1.902 - 6.493 rally. Such a derived Fibonacci progression relationship is not without precedent however. For even on this active-continuation chart basis, we think it is extraordinary that that 2012-to-2014 rally stalled within six measly cents of the 1.000 progression of its 2006 - 2008 predecessor rally from 4.05 to 13.694.
Again, we do NOT recommend RELYING on this Fibonacci fact but derived level at 3.441 as one that's technically relevant until and unless the market stems the clear and present uptrend with a confirmed momentum failure below at least 3.277. Bull's should take solace in the fact that the market has identified such a specific and objective risk parameter to a bullish policy. But a failure below 3.277, while admittedly of only a minor degree, could be a longer-term game-changer.
These issues considered, a cautious bullish policy remains advised with a failure below 3.277 required to threaten this count enough to warrant moving to a neutral/sideline position ahead of what could morph into a more significant peak/reversal environment. In lieu of such sub-3.277 weakness further and possibly accelerated gains remain expected with former 3.36-to-3.35-area resistance considered new near-term support.