In Mon’s Technical Blog we discussed two admittedly small scale displays of weakness with last Thur’s micro mo failure below 21-Jan’s 3307 corrective low followed by last Fri’s relapse below Thur’s 3301 initial counter-trend low. The subsequent fallout was to Mon’s 3233 low detailed in the 240-min chart below. This short-term term weakness has defined 22-Jan’s 3338 high as one of developing importance and our short-term risk parameter the market remains required to recoup to confirm the recent sell-off attempt another 3-wave and thus corrective affair consistent with the secular bull trend.
Since Mon however, this chart also shows a near-61.8% retrace of the preceding 3338 – 3233 decline and overnight’s relatively extensive relapse. Further weakness below Mon’s 3233 initial counter-trend low will reinforce at least the intermediate-term trend as down and expose a larger-degree correction. Per such, we advise even long-term players to trail protective sell-stops to levels just below this 3233 level that we’re now considering our new long-term risk parameter. Continued sharp, solid gains across the interest rate sector (we’ll be updating next) and continued meltdowns in copper and the energy sector would seem to reinforce a broader peak/correction count in equities.
While it would take weakness below at least key former resistance-turned-support from Jul’19’s 3025-area to threaten the secular bull market following 4Q19’s impressive, impulsive resumption of this massive bull, it’s not hard to see the prospect that the rally from 03Oct19’s 2855 low may be a complete 5-wave Elliott sequence as labeled in the daily chart above. Admittedly, Mon’s 3233 low is a very tight risk parameter from this longer-term perspective, but under the collapsing interest rate, energy and copper circumstances, even longer-term traders are advised to err on the side of a more conservative approach to risk assumption. If this count is wrong, the cost or risk is that of smaller-degree whipsaw risk above 22-Jan’s 3338 high or even yesterday’s 3293 high. If no defensive measures are taken on a sub-3233 failure, the downside risk thereafter is indeterminable and, to us, unacceptable. Better being out, wishing you were in, then in, wishing you were out.
These issues considered, a neutral-to-cautiously-bearish policy is advised for shorter-term traders with a recovery above at least 3293 (micro risk) and/or 3338 required to threaten or negate this call and warrant its cover. A bullish policy remains OK for long-term players with a failure below 3233 required to defer or threaten our long-term bullish count enough to warrant neutralizing all bullish exposure and circumventing the depths unknown of a larger-degree correction lower. This bullish policy can always be reset following a relapse-stemming bullish divergence in momentum and/or a recovery above 3293 and, as a last resort, 3338.