This morning’s relapse below 23-Dec’s 124.90 low and our short-term risk parameter discussed in 27-Dec’s Technical Blog nullifies the bullish divergence in shorter-term momentum discussed in that day’s technical blog and resurrects a broader peak/correction/reversal count.  Today’s resumed weakness leaves 31-Dec’s 134.65 high in its wake as the latest smaller-degree corrective high and new short-term risk parameter from which shorter-term traders can rebase and manage the risk of a resumed bearish policy and exposure.

Our broader peak/correction/reversal count introduced in 19-Dec’s Technical Blog remains predicted on:

  • 19-Dec’s bearish divergence in daily momentum shown below
  • a complete 5-wave Elliott sequence up from 11-Oct’s 92.20 low
  • an understandable spike in our RJO Bullish Sentiment Index to a 3-year high of 80% shown in the weekly log chart above, and
  • the market’s rejection thus far of the (141.77) 38.2% retrace of the massive EIGHT YEAR secular bear trend from May’11’s 308.90 high to May’19’s 87.60 low on a monthly log scale basis below.

To be sure, the magnitude of Oct-Dec’s 92.20 – 142.45 rally is indeed impressive, with the past couple weeks’ relapse attempt falling well within the bounds of a mere correction on a longer-term basis.  But especially given this morning’s resumption of the slide below 23-Dec’s 124.90 initial counter-trend low, this market is required to stem this slide with a confirmed bullish divergence in momentum and/or recoup 31-Dec’s 134.65 corrective high to resurrect a broader bullish count.  Until either of these requirements is satisfied, the extent of this correction OR REVERSAL lower is indeterminable and potentially severe.

These issues considered, traders are advised to return to a cautious bearish policy from 124.90 OB with a recovery above 134.65 required to negate this call, warrant its cover and resurrect a longer-term bullish count.  In lieu of such 134.65+ strength, further and possibly steep, accelerated losses straight away should not surprise.

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