Today’s clear break of last Thur’s 174.17 corrective low and recently stubborn support finally confirms the bearish divergence in momentum needed to identify last Fri’s 174.97 high as the end of the rally from at least 10-Sep’s 173.06 low and possibly the end of a major (bear market) correction that dates from mid-Mar. As a direct result of this admittedly short-term momentum failure, we’re defining that 174.97 high as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively base non-bullish decisions like long-covers and new bearish punts.
This short-term rollover becomes very compelling when one considers the longer-term bearish prospect that all of the price action up from 19-Mar’s 168.99 low close is arguably a huge lateral triangle formation as labeled in the daily close-only chart of the Dec contract above. We have identified 04-Aug’s 175.08 high close as our key long-term risk parameter the market needs to close above to negate this count. Until and unless such strength is proven, this extraordinarily labored and choppy recovery attempt from that mid-Mar low is about as corrective and consolidative as it gets and warns of a resumption of Mar’s downtrend that preceded it.
IF this count is correct, then somewhere along the line the bear needs to perform with trendy, impulsive and sustained movement lower into the 172- and 171-handles that becomes increasingly obvious. If/when the market provides this reinforcing evidence, then our longer-term bear risk parameter will be trailed to 29-Sep’s 174.85 high close and/or last week’s 174.97 intra-day high.
From an even longer-term perspective, the weekly log active-continuation chart below shows the market still deep within the middle-half bowls of the past 14-month range where the odds of aimless whipsaw should still be approached as high, warranting a more conservative approach to risk assumption. Such an approach highlights tighter but objective risk parameters like 174.97.
These issues considered, a bearish policy remains advised for long-term players with a close above 175.08 required to negate this call and warrant its cover. Shorter-term traders are advised to move to a bearish policy and exposure from current 174.02-area levels OB with a recovery above 174.97 required to negate this call and warrant its cover. Until and unless such 174.97+ strength is shown, further and possibly accelerated losses straight away are expected.