Yesterday's bullish divergence in short-term momentum above 21-Dec's 10.23 high in the now-prompt Mar contract leaves Fri's 9.97 low in its wake as one of developing importance and the end of at least the decline from 16-Dec's 10.48 high. Given the 3-wave appearance THUS FAR of the decline from 06-Dec's 10.71 low however, we cannot ignore a broader bullish count that contends this 3-wave sell-off attempt is a mere correction within a broader BASE/reversal environment that dates from 31-Aug's 9.46 low close.
IF such a broader bullish count is to remain intact for longer-term players however, the market has two near-term hurdles it needs to overcome: mid-Dec's former 10.30-to-10.35-range support-turned-resistance and that 10.48 corrective high and short-term risk parameter from 16-Dec. Conversely, to more severely threaten or mitigate our longer-term bullish count introduced in 27-Oct's Technical Blog, the market needs to resume the past month's slide below Fri's 9.97 low and new key risk parameter. In effect we believe the market has defined 10.48 and 9.97 as the key directional triggers heading forward.
The extent of the past month's sell-off is not unimpressive. But relative to a full three months worth of uptrending prices from 31-Aug's 9.46 low shown in the daily close-only chart above, this setback falls well within the bounds of a mere correction THUS FAR. Resumed weakness below Fri's 9.99 low close (or 9.97 intra-day) will tilt the longer-term directional scales south and threaten or defer our preferred broader bullish count. Additionally, the market's current position pretty much in the middle of the middle-half of this entire year's range cannot be ignored as fertile ground for aimless whipsaw risk. The current 50% reading in the Bullish Consensus (marketvane.net) measure of market sentiment suggests the masses are calling this market a coin flip and are not committed to either direction.
From a very long-term perspective we continue to believe that Nov'15's 8.44 low ENDED the secular bear market from Sep'12's 17.89 all-time high and that the market has been in a major base/reversal process ever since. This said, such major base/reversal processes can include QUARTERS of frustratingly aimless, lateral, choppy price action as the two previous examples (2009-10 and 2005-06) circled in blue below show. From this long-term perspective the $0.50-cent range cited above seems almost laughable as a "key" directional pivot. What this long-term view DOES provide is perspective and that this current environment is a challenging one that continues to call for a more conservative approach to risk assumption. We do not believe that anyone's going to be hitting home runs here. Rather, traders are advised to focus on identifying smaller-degree risk parameters and be content with trying to hit singles, with the occasional one that finds the gap and provides a bigger winner.
Theses issues considered, shorter-term traders with tighter risk profiles remain OK to maintain a cautious bearish policy with strength above 10.35 threatening this call and further strength above 10.48 negating it and exposing a run to new highs above 10.71. Longer-term players remain advised to maintain a cautious bullish policy with a failure below 9.97 threatening this call enough to warrant moving to the a neutral/sideline position.