Posted on Jan 19, 2024, 09:21 by Dave Toth

The extent and impulsiveness of today’s bust out above 08-Dec’s pivotal 83.13 high and our key longer-term bear risk parameter nullifies our longer-term corrective/consolidative count up from 08-Nov’s 77.66 low and confirms a larger-degree and steeper correction of Sep-Nov’s plunge or a broader reversal of it.  By blowing away that 83.13 high that has capped this market for over two months, the market has exposed a vast area totally devoid of any technical levels of merit shy of 28-Sep’s 90.29 high and leaves now-former resistance between 83.13 and 81.75 as new and key support ahead of further and possibly protracted gains straight away.

Because of the extent and accelerated nature of this week’s rally that has “3rd-wave” written all over it, we’re identifying 29-Dec’s 81.75 high as the end of the 1st-Wave of an eventual 5-wave sequence up from 21-Dec’s 78.31 low that could have miles to go.  To maintain the impulsive integrity of this count, the market should not come anywhere near 81.75 at this point, let alone break it.  Per such, we’re defining 81.75 as our new long-term parameter from which non-bearish decisions like short-covers and bullish punts can be objectively based and managed.

The dally chart below shows today’s impressive, impulsive bust out above the past two months’ resistance that confirms the longer-term trend as up.  Per such and again, we’d expect at least a 5-wave sequence up from 21-Dec’s 78.31 low that has potentially much further to go and requires a relapse below 81.75 to nullify.  And such a count would call for not only higher prices, but accelerated gains in the immediate period ahead as the market is considered only in the dramatic 3rd-Wave of the eventual 5-wave sequence.  Upside potential should not be underestimated under these conditions and until/unless countered by a rally-stemming bearish divergence in momentum, the threat of which is nowhere to be found at the moment

If there’s a “but” to this or any directional argument, it’s the market’s reversion to deep, deep within the middle-half bowels of the past couple years’ range that remains a subset of the middle-half bowels of its massive but lateral historical range that goes back 13 YEARS.  Such range-center black holes are notorious for aimless whipsaw risk that warrants a more conservative approach to directional risk assumption.  This said, between the wave count offered up above and the fact that or RJO Bullish Sentiment Index is at relatively low levels (45%), further and possibly accelerated gains should not surprise.

These issues considered, all previously recommended longer-term bearish policy has been nullified and traders are advised to move to a cautious bullish stance and first approach dips as corrective buying opportunities.  At this juncture, a failure below 81.75 is required to negate this call.  As the only bull risk parameter at this time, traders should not enter a bullish position until/unless comfortable with risk assumed to this level.  We will keep a close watch for an interim dip that might present a preferred risk/reward buying opportunity.  In the meantime, further and possibly accelerated gains are anticipated.

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