Posted on Jun 29, 2023, 08:24 by Dave Toth
Following this market’s mid-Jun price explosion, we ultimately identified 26-May’s 5.36 high as the prospective end to a 1st-Wave of an eventual 5-wave sequence higher IF the market was poised for a major reversal higher. This 5.36 high became the level and bull risk parameter the market needed to sustain gains above in order to maintain the impulsive integrity of a broader bullish count. Yesterday and overnight’s failure below this level negates the impulsive integrity of such a broader bullish count and renders May-Jun’s recovery attempt a 3-wave affair as labeled in the daily log chart below.
As the market has yet to reaffirm the secular bear trend by a break below 18-May’s 4.91 low, we cannot conclude 21-Jun’s 6.30 high as the END of a major bear market correction, as opposed to just its upper boundary ahead of further consolidative chop between 6.30 and 4.91. However, until and unless this market recoups 6.30, longer-term traders are advised to approach the recovery from 4.91 as corrective selling/hedging opportunity ahead of an eventual resumption of what we still believe is a new multi-year secular bear market from Apr’22’s 8.25 high. In this long-term regard, 21-Jun’s 6.30 high is considered our new long-term parameter from which the risk of a resumed bearish policy and exposure can be objectively rebased and managed.
From a shorter-term perspective, the hourly chart below shows this week’s continued fallout from 23-Jun’s bearish divergence in short-term momentum below 5.90 discussed in 23-Jun’s Technical Webcast. The past couple days’ continued slide leaves Mon’s 6.01 high in its wake as the latest smaller-degree corrective high this market is now required to recoup to break the clear and present intermediate-term downtrend that could morph into an impulsive resumption of the major bear trend. Per such, we’re defining 6.01 as our new short-term parameter from which the risk of non-bullish decisions like long-covers and cautious bearish punts can be objectively rebased and managed.
IF the current relapse is just the B-Wave within a broader lateral consolidation between the past month’s key boundaries at 6.30 and 4.91, the market needs to arrest the current slide with a countering bullish divergence in short-term momentum from a level north of 4.91. Until and unless such a divergence stems the slide, it continuance or acceleration should not surprise. We will keep a keen eye out for such a divergence and update traders accordingly.
From a very long-term perspective, the monthly log active-continuation chart below shows the market having yet to provide any evidence to threaten what we’ve argued since Apr-Jul’22’s impulsive plunge is a major peak/reversal process similar to that that unfolded from 2012’s 8.49 all-time high. The scope of the market’s downside potential is indeterminable and potentially extreme. Within this count, the weekly log close-only chart of the Dec contact shows the recent relapse from 16-Jun’s high weekly close at 5.98 and exact 76.4% retrace of Oct-May’s decline that remains within the bounds of a major bear market correction. To threaten this long-term bearish count, minimally, the Dec contract needs to recover above this month’s highs, 5.98 on a weekly close-only basis and/or an intra-day move above 6.30.
Again, while this month’s 4.91 low remains intact, we cannot ignore the possibility of further and potentially very volatile lateral chop within this month’s range. But until and unless this market either recovers above our short-term risk parameter at 6.01 or at least arrests the intra-range plunge with a countering bullish divergence in short-term momentum, further and possibly steep losses should not surprise.
These issues considered, a cautiously bearish policy and exposure are advised with a recovery above 6.01 required to defer or threaten this call enough to warrant moving to the sidelines. In lieu of such 6.01+ strength, further and possibly accelerated losses are expected.