Posted on Aug 09, 2023, 07:31 by Dave Toth
By breaking 12-Apr’s 83.53 high overnight, the market has broken the upper boundary and resistance of a range that has constrained it for NINE MONTHS, exposing a vast area above the market totally devoid of any technical levels of merit. On a weekly close-only basis below, today’s break above 10-Apr’s 82.68 high reaffirms a bullish divergence in weekly momentum that, combined with late-Jun’s 60% reading in the Bullish Consensus (marketvane.net), it’s most pessimistic level in SEVEN YEARS, confirms our broader bullish count introduced in 05-Jul’s Technical Blog that warned of a larger-degree correction or reversal higher of indeterminable scope.
Now that the market has reaffirmed the break of Jun’22 – Mar’23’s major downtrend, the bull is free to PERFORM. Whether it does or not in the days and weeks immediately ahead will tell us whether the rally from late-Jun’s lows- 69.50 on a weekly close basis and 66.80 on an intra-day basis- the “just” the completing C-Wave of a major bear market correction OR the dramatic 3rd-Wave of a more protracted reversal higher.
The daily high-low chart above and close-only chart below detail today’s breakout above 12-Apr’s 83.53 and 83.26 highs that breaks the upper boundary of a 10-MONTH lateral range and resistance. Above that threshold are NO levels of any technical merit to inhibit the bull, so it is free to PERFORM like a bull should with sustained trendy, impulsive and increasingly obvious behavior higher and straight away. We phrase the bull’s responsibility this way because against the backdrop and magnitude of 2022 – 23’s major downtrend, the relatively minor price recovery from the Mar lows thus far easily falls within the bounds of a mere corrective hiccup within a new secular bear market.
This prospective correction could top out tomorrow. BUT IF this market has something broader to the bull side in mind, it now has every opportunity and responsibility to prove it by sustaining trendy, impulsive behavior higher straight away. As we’ll detail below, yesterday’s 79.90 intra-day low and 02-Aug’s 79.75 low close serve as this market’s latest smaller-degree corrective lows we believe the market needs to sustain gains above to maintain the risk/reward merits of a continued bullish policy and exposure “up here”. Its failure to do so won’t be of a scale sufficient to conclude a broader reversal lower, but it would compromise the risk/reward metrics of a bullish policy and exposure enough to warrant defensive measures, especially by shorter-term traders with tighter risk profiles.
The 240-min chart below details today’s continued uptrend above Mon’s 83.30 high that leaves yesterday’s 79.90 low in its wake as the latest smaller-degree corrective low and risk parameter we believe this market needs to sustain gains above to maintain a more immediate bullish count. Given the magnitude of the past month-and-a-half’s impressive, impulsive rally, no, a failure below 79.90 will NOT be of a sufficient scale to conclude a broader top. But it will be sufficient to identify whatever high is left in the wake of that failure as one of developing importance and an objective level from which to base non-bullish decisions like long-covers. This 79.90 bull risk parameter is also important because, due to the extent and uninterrupted nature of Jul’s portion of the bull that left nothing in the way of former battlegrounds that might now be looked to as support and a larger-degree bull risk parameter, there are NO levels of any technical merit to take defensive steps below these 79.90 and 79.75 levels.
Lastly and from an even longer-term monthly perspective, the chart below shows this market smack in the middle of its massive but lateral historical range where the odds of aimless whipsaw risk are advised to be approached as higher, warranting a more conservative approach to directional risk assumption. Herein lies the importance of identifying tighter but objective risk parameters like 79.90, the failure below which will compromise the now-five-month recovery and leave the market prone to a reversion to the 10-month range, or worse.
These issues considered, a bullish policy remains advised with a failure below 79.90 required to defer or threaten tis call enough to warrant moving to a neutral/sideline position. In lieu of such weakness, further and possibly accelerated gains straight away are expected.