Posted on Oct 20, 2023, 11:23 by Dave Toth

A full month ago, in 18-Sep’s Technical Blog following the market’s resumption of the major bear trend, we identified 29-Aug’s 5.00 corrective high as THE level this market needed to recoup to confirm a bullish divergence in daily momentum and break Jul-Sep’s portion of the secular bear market.  Yesterday and after weeks of an agonizingly deliberate recovery attempt, the daily chart below shows the market FINALLY taking out that 5.00 larger-degree corrective high and exposing a larger-degree correction or reversal higher.  As a direct result of this strength, the market has identified Tue’s 4.88 low as the latest smaller-degree corrective low the market is now expected to sustain gains above per any more immediate bullish count.  Per such, we’re defining this 4.88 level as our new short-term but key parameter from which the risk of non-bearish decisions like short-covers, bullish punts and pared or neutralize bear hedges can be objectively based and managed.

The hourly chart above details yesterday’s clear, impulsive spike above the key 4.99/5.00-area, Tue’s 4.88 corrective low and that now-former 4.99/5.00-area resistance that would fully be expected to hold as new near-term support per any broader bullish count.

The daily log close-only chart below shows the importance of yesterday’s break above the 4.97-to-5.00-area that exposes a vast area totally devoid of any technical levels of merit shy of late-Jul’s 5.69 larger-degree corrective high.  After weeks of grudging upside price action from 19-Sep’s 4.68 intra-day low, the bull now has every opportunity to PERFORM.  It is free to correct or reverse higher for an indeterminable amount of time and price that could be extensive given recent historically bearish levels of sentiment/contrary opinion we’ll discuss below.  A failure back below former resistance-turned-support around the 4.97-to-5.00-area would be the first sign of trouble.  Subsequent weakness below 4.88 would break the past month’s uptrend and, given that it has only retraced a Fibonacci minimum 38.2% of Jul-Sep’s plunge thus far, could re-expose the secular bear market.

Until/unless the market fails below these new short-term but key bull risk areas, we expect the bull to BEHAVE LIKE ONE by sustaining trendy, impulsive and increasingly obvious behavior to the upside straight away.

On a weekly log close-only basis, the chart of the Dec contract above and most active contract below show the market’s recovery above former 4.95-to-4.99-area support-turned-resistance from late-Jul and mid-May.  Amidst historically bearish sentiment/contrary opinion levels, this is an encouraging sign for the bull for a larger-degree correction or reversal higher.  But again, per a more immediate bullish count, let alone a more protracted correction or reversal higher, the bull should now be expected to BEHAVE LIKE ONE with trendy, impulsive behavior higher.

From an even longer-term perspective, the monthly log chart below shows the massive, multi-quarter peak/reversal process from Apr 2022’s 8.25 high that is virtually identical to the 2011 – 2012 major topping process and start of a new multi-YEAR secular bear market.  The past month’s recovery attempt barely registers on this scale, so longer-term commercial players are advised to first approach whatever upside this market may have in store for us in the weeks or months ahead as another BEAR MARKET CORRECTIVE SELLING/HEDGING OPPORTUNITY.

An interim risk or challenge or frustration to the bear is the market’s current position deep, deep within the middle-half bowels of its massive but lateral historical range where the odds of aimless whipsaw are higher, warranting a more conservative approach to directional risk assumption.  Traders of all scales or risk profiles should not only not be surprised by a jump in historical volatility and aimless whipsaw, but should EXPECT such behavior in the period ahead.  Herein lies the importance of identifying tight but objective directional risk parameters like 4.88.

These issues considered, traders have been advised to move to at least a neutral/sideline position if not a cautiously bullish stance with a failure below 4.88 required to threaten this call enough to warrant moving to the sidelines.  In lieu of such sub-4.88 weakness, further and possibly accelerated gains are anticipated.

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