Posted on Jan 02, 2024, 11:17 by Dave Toth

Today’s impulsive break above 18-Dec’s 171.00 high reaffirms our interim base/correction/recovery count introduced in 18-Dec’s Technical Blog that could be protracted in scope given the extent of Sep-Dec’s 34-cent, 17% collapse.  The important by-product of today’s continuation of early-to-mid-Dec’s initial counter-trend rally is the market definition of 26-Dec’s 167.35 low as the latest smaller-degree corrective low this market would be expected to sustain gains above per any broader correction higher.  Per such, we’re defining 167.35 as our new short-term parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage non-bearish decisions like short-covers and bullish punts.

Given the magnitude of Sep-Dec’s decline, this month’s recovery easily still falls within the bounds of a 45th-Wave correction ahead of at least another (5th-Wave) round of new lows below 162.40.  To reinforce such a resumed bearish count, the market needs to break 26-Dec’s 167.35 low, rendering the recovery from 162.40 a 3-wave and thus corrective affair.  Until/unless such weakness is proven, and especially if this market continues to recover above 29-Nov’s 173.875 larger-degree corrective high and key long0-term bear risk parameter, we have to acknowledge that this market is in the early stages of a major (2nd-Wave) corrective rebuttal to a textbook complete 5-wave Elliott sequence down from 196.60 to 162.40.  And if this count is correct, we could easily see “extensive” gains to the 182-handle-area (61.8% retrace) or more in the weeks ahead.

Moving back even further, the weekly log active-continuation chart below shows the elements on which our major peak/reversal count is predicated:

  • a confirmed bearish divergence in weekly momentum amidst
  • historically frothy bullish sentiment/contrary opinion levels in 3Q23
  • a textbook complete 5-wave Elliott sequence from Jun’22’s 129.975 low to 19-Sep’s 192.05 high
  • an arguably and even longer-term 5-wave sequence that dates from Apr’20’s 76.60 low where
  • the prospective completing 5th-Wave from Jun’22’s 129.972 low came within 4-cents of the (195.85) 0.618 progression of the net distance of Waves-I-thru-III (76.60 – 148.70).

Traders are reminded however that often times extensive- in terms of both price and time- (2nd-wave) corrective rebuttals to initial (1st-wave) counter-trend declines are typical within major peak/reversal PROCESSES.  We have discussed this prospect often over the past few weeks and this month’s recovery easily fits the bill of early rumblings of such, with a relapse now below 167.35 required to possibly diffuse or delay such a recovery.

These issues considered, a cautious bullish stance remains advised for shorter-term traders with a failure below 167.35 required to negate this specific call and warrant its cover ahead of a then-prospective resumption of the new secular bear market.  Longer-term commercial players have been advised to pare bearish exposure to more conservative levels and are further advised to neutralize remaining exposure on a recovery above 173.875 and even reversing into a cautious bullish policy at that point ahead of what we believe may be a multi-week or even multi-month corrective recovery to the 178- or 182-handle-areas, or higher.

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