Posted on Feb 08, 2024, 07:15 by Dave Toth

In last Fri’s Technical Blog we discussed this market’s teetering position on the brink of a possible collapse below last May’s key low(s) around the 44.53-to-44.49-area and identified 01-Feb’s 46.38 minor corrective high as a minimum level this market needed to recover above to confirm a bullish divergence in momentum and threaten a more immediate bearish count and continuation of a secular bear market.  The market’s recovery above 46.38 yesterday confirms a bullish divergence in short-term momentum that defines Mon’s 44.51 low as one of developing importance and possibly the end of a major 5-wave sequence down from 24-Jul’s 64.53 high.

This short-term mo failure is of an insufficient scale to conclude a broader recovery.  But until/unless this market relapses below 44.51, this bullish divergence in short-term momentum has at least deferred this market from the brink of collapse and may be the start of a more protracted correction or reversal higher.

On a broader scale, the daily log chart of the Mar contract above shows the major downtrend from last Jul’s 64.53 high and the requisite proof of larger-degree strength above at least 23-Jan’s 48.65 larger-degree corrective high required to confirm a bullish divergence of a (daily) scale required to break even the portion of the downtrend from 22-Nov’s 53.32 high, let alone allow us to conclude a 5-wave sequence down from 64.53.

However, the combination of:

• the market’s position at the extreme lower recesses of the past year’s range
• an arguably textbook 5-wave sequence down from 64.53 in which
• the prospective 5th-Wave down from 53.32 same within 22 ticks of its (44.73) 0.618 progression of the net distance of Waves-1-thru-3 (64.53 – 48.56), and
• historically low levels in our RJO Bullish Sentiment Index

is a unique and compelling list of technical facts and observations that easily could be the underpinnings of a more protracted BASE/correction/recovery environment.

These issues considered, shorter-term traders have been advised to move to a neutral/sideline position with a failure below 44.51 required to reinstate the bear and warrant a return to a bearish stance.  Longer-term commercial players are advised to pare bearish exposure to more conservative levels, jettison remaining exposure on a recovery above 48.65 and also reverse into a new cautious bullish stance.  In effect, we believe this market has identified 44.51 and 48.65 as the key directional thresholds heading forward around which traders can objectively toggle directional biases and exposure.