Posted on Jul 10, 2023, 10:37 by Dave Toth
While the hourly chart below shows that the market as yet to take out 07-Jun’s 178.10 intra-day high, today’s break above last week’s 177.35 high reaffirms our bullish count discussed in 29-Jun’s Technical Blog that concluded 28-Jun’s bullish divergence in short-term momentum above 172.30 rendered mid-Jun’s preceding setback attempt from 178.10 to 168.10 a 3-wave and thus corrective affair that warned of a resumption of the secular bull trend. As a result of this continued recovery, the market has identified 06-Jul’s 173.425 low and 21-Jun’s 168.10 low as the latest smaller- and larger-degree corrective lows it is now required to fail below to defer and threaten the major bull trend. In this regard, these levels serve as our new short- and long-term parameters from which the risk of a resumed or continued bullish policy and exposure can be objectively rebased and managed.
Stepping back, the daily (above) and weekly (below) charts of the Aug contract show the magnitude of the secular bull market and the 3-wave and thus corrective structure of mid-Jun’s sell-off attempt consistent with the major bull. To threaten this secular bull market, commensurately larger-degree strength below 21-Jun’s 168.10 larger-degree corrective low is MINIMALLY required, and hence the importance of this level as our key long-term bull risk parameter.
Historically extreme bullish sentiment/contrary opinion levels are a natural by-product of such a mega-bull. Such extreme bullish sentiment is also typical of virtually every major topping process. The timing key to such a peak/reversal environment comes down to MOMENTUM, as a confirmed bearish divergence in momentum below a larger-degree corrective low is required to render sentiment/contrary opinion an applicable technical tool in the navigation of a major peak/correction/reversal threat. Until such a momentum divergence breaks the major but simple uptrend pattern of higher highs and higher lows, sentiment/contrary opinion levels can stay in the stratosphere indefinitely. But as all larger-degree momentum failures typically start with a smaller-degree failure, even smaller=degree corrective lows and risk parameters like 173.425 must be taken into account as helpful navigation and risk management levels, especially for shorter-term traders.
On an even broader monthly log active-continuation basis, the chart below shows the sheer magnitude of the 3-YEAR secular bull trend to new all-time highs over 2014’s 172.75 high. We all know that this mega-bull will end somewhere along the line and probably expose a new multi-year bear market. But until and unless the market breaks the clear and present uptrend with weakness below at least 173.425 and preferably 168.10, the trend is up on all scales and should not surprise by its continuance or acceleration straight away and to indeterminable heights. Per such, a bullish policy and exposure remain advised with a failure below 173.425 for shorter-term traders to move to the sidelines and commensurately larger-degree weakness below 168.10 for longer-term commercial players to follow suit.