Posted on Oct 03, 2023, 07:40 by Dave Toth
By virtue of overnight’s break below 07-Sep’s 0.7303 low, the market has confirmed Se’s recovery attempt as a (suspected 2nd-Wave) correction and resurrected the broader downtrend from 14-Jul’s 0.7644 high that, for long-term reasons addressed below, could be the resumption of the past two-YEAR downtrend to eventual new lows below Oct’22’s 0.7156 low. As discussed in yesterday’s Technical Webcast, the extent and impulsiveness of Fri and yesterday’s plunge defines Fri’s 0.7462 high as the corrective high this market must now recoup to negate this longer-term bearish count. Smaller-degree strength above 21-Sep’s 0.7394 (suspected minor 1st-Wave low) is required to threaten this bearish count. Per such, 0.7394 and 0.7462 serve as our new short- and long-term parameters from which traders can objectively base and manage the risk of a resumed bearish policy and exposure commensurate with their personal risk profiles.
On a broader scale, the extent and impulsiveness of Jul-Sep’s decline AND rejection of a ton of former support-turned-resistance from the 0.76-handle-area renders the entire recovery attempt from Oct’22’s 0.7156 low to Jul’s 0.7644 high a clear 3-wave affair as labeled in the weekly chart below. Left unaltered by a recovery above at least Fri’s 0.7462 high and preferably Jul’s 0.7644 high, this 9-month, 3-wave labored recovery attempt is considered a corrective/consolidative structure that warns of a resumption of Jun’21 – Oct’22’s major downtrend that preceded it to eventual new (suspected 5th-Wave) lows below 0.7156.
Stepping back even further, the monthly chart below shows this market still within a massive but lateral range between 0.68-and-0.83 that has dominated it for nearly EIGHT YEARS. Our preferred long-term count calls for at least one more (5th-Wave) run at its lower extremes and possibly a break below 2016’s 0.6809 low in a resumption of the secular 12-YEAR bear market from 2011’s 1.0618 high.
These issues considered and while admitting that initiating bearish exposure “down here” around the 0.7300-area presents risk/reward concerns, a cautious bearish policy and exposure are advised with a recovery above at least 0.7394 required to negate this call and warrant its cover. Shorter-term traders also have the option of waiting for a smaller-degree corrective bounce and countering bearish divergence in short-term mo needed to stem that bounce and reject/define a tighter, more practical and acceptable short-term risk parameter before taking a punt from the bear side. In general however, further and possibly protracted multi-month losses to eventual levels below 0.7156 are expected with a recovery above at least 0.7462 required to threaten this call.