Posted on Aug 22, 2023, 09:51 by Dave Toth

Today’s recovery above 11-Aug’s 401.6 corrective high and our short-term bear risk parameter discussed in 15-Aug’s Technical Webcast confirms a bullish divergence in short-term momentum and exposes another reversion to the middle-half bowels of this year’s incessant lateral range in the Dec contract.  The key takeaway from this short-term mo failure is the market’s definition of last Thur’s 379.0 low as one of developing importance and our new short-term parameter from which the risk of non-bearish decisions like short-covers can be objectively based and managed by shorter-term traders with tighter risk profiles.

On a broader scale, the daily chart of the Dec contract above shows the market’s reversion once again to the middle-half bowels of the range that has dominated it since Mar’s 437 high and where the odds of aimless whipsaw risk remain high.  Such range-center conditions are a technical and trading “no-man’s land” where trend-followers go to perish and the risk/reward metrics of initiating directional exposure are abhorrent.  Such an environment warrants a neutral/sideline policy for shorter-term traders.  For longer-term commercial players, commensurately larger-degree strength above 27-Jul’s 424.7 larger-degree corrective high remains required to negate our specific bearish count and warrant moving to the sidelines.

An interesting development must be acknowledged on a daily active-continuation basis below, however.  Given the extent to which the market tested but held 29-Jun’s 374.6 low that followed a clear 3-wave recovery from that 374.6 low to 27-Jul’s 424.7 high, we have to give some consideration that the correction/consolidation from 29-Jun’s 374.6 low is a 3-3-5 “flat” correction that, if correct, warns of a potentially sharp but correction-completing C-Wave up to the upper recesses of this range near 27-Jul’s key 424.7 high and key long-term bear risk parameter.  The Fibonacci fact that the neighboring 425.6 level is the 38.2% retrace of Feb-Jun’s entire 508.2 – 374.6 5-wave decline adds intrigue to this area.

The point here is that until/unless countered by a bearish divergence in short-term mo. today’s recovery above could expose a sharp pop to 420-area levels straight away.  We will, of course, keep a keen eye on such a recovery-stemming bearish divergence in mo that might not only mitigate the prospect of a move to 420, but also resurrect a longer-term bearish count.

Indeed, on a longer-term weekly (above) or monthly (below) log scale basis, the long-term trend remains clearly down.  Recovery attempts are swimming against this major current and are still advised to first be approached as bear market corrections and selling opportunities for longer-term commercial players, especially with a still-frothy 80% reading in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC.

These issues considered, a bearish policy and exposure remain advised for longer-term commercial players with a recovery above 424.7 required to negate this call and warrant its cover.  Shorter-term traders have been advised to move to a neutral/sideline position as a result of today’s bullish divergence in short-term mo in order to circumvent the heights unknown of a suspected intra-range correction higher.  We will be watchful for a recovery-stemming bearish divergence in short-term mo to potentially re-expose the broader bear and provide a preferred risk/reward opportunity for shorter-term traders to reconsider a bearish position.  A relapse below 379.0 negates this shorter-term call, reinstates the bear and exposes potentially steep losses thereafter.

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