Today’s clear, impulsive break below last week’s 91.20 low reaffirms our major peak/reversal count discussed in 22-Jun’s Technical Blog and leaves 30-Jun’s 99.49 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to confirm a bullish divergence in momentum and stem the past month-and-a-half’s 43% meltdown.  Per such, this 99.49 high is considered our new short-term but key risk parameter from which both short- and longer-term traders are advised to rebase and manage the risk of a still-advised bearish policy and exposure.

On a broader scale, the daily (above) and weekly (below) log scale charts show the extent of the current meltdown that stemmed from the unique and compelling list of peak/reversal elements discussed since mid-Jun:

  • a bearish divergence in WEEKLY momentum
  • complete and massive 5-wave Elliott sequence up from Apr’20’s 48.35 low
  • historically frothy sentiment/contrary opinion levels
  • the market’s engagement and total rejection of the upper-quarter of its historical range shown in the monthly log chart below.

Indeed, it was this combination of a bearish divergence in weekly momentum amidst stratospheric levels in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC that created the fertile ground for such a flush out as the overall market forced the capitulation of this long-&-wrong exposure that produced its highest level (100%!) ever recorded.  While we expect sharply lower levels when our RJO BSI is updated this Fri, this indicator has done its job in warning of a major peak and reversal.

Now that this shoe has dropped however, this market is only a bullish divergence in daily momentum away from arresting this initial A- or 1st-Wave down and exposing a corrective rebuttal that could be extensive in terms of both price and time.  Herein lies the importance of recent corrective highs and even short-term risk parameters like 99.49.  Until and unless the market recovers above such a level, further losses remain expected.

These issues considered, a bearish policy and exposure remain advised with a recovery above 99.49 required to stem the decline and warrant a move to the sidelines to circumvent the heights unknown of a corrective recovery that could be extensive.

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