Overnight’s recovery above 18-Aug’s 1.1973 high and short-term risk parameter left in the wake of 21-Aug’s bearish divergence in short-term momentum confirms Aug’s mere lateral chop as a corrective/consolidative structure and reaffirms the major bull trend and reversal from 23-Mar’s 1.0671 low.  This resumed strength leaves smaller- and larger-degree corrective lows in its wake at 1.1887 and 1.1758, respectively, the market is now required to fail below to threaten and then confirm a bearish divergence in daily momentum needed to negate a bullish count and expose a larger-degree correction or another patented intra-four-year-range relapse.  Per such, this 1.1758 level becomes our new key risk parameter from which shorter-term traders can rebase a resumed bullish policy and long-term players can rebase and manage the risk of a still-advised bullish policy.

The daily chart above shows the resumption of an impressive 5-month reversal from 23-Mar’s 1.0671 low that may be nearing the end of a 5-wave Elliott sequence from 24-Apr’s 1.0739 low as labeled.

  • Waning upside momentum
  • the return to historically frothy sentiment levels shown in the weekly chart below
  • the market’s encroachment on the upper-quarter of the massive four year lateral range and
  • the market’s proximity to two neighboring Fibonacci progression relationships in the 1.20-handle

are factors to watch as contributors to a prospective peak/correction/reversal threat.

None of these factors matter however until and unless the market breaks the clear and present uptrend.  And we will gauge such a momentum failure precisely around 21-Aug’s 1.1758 corrective low and new key bull risk parameter.  Until and unless the market fails below this level, there is no way to know this bull won’t extend/accelerate per a massive multi-year base/reversal process to eventual heights above Feb’18’s 1.2580 high.

Granted, only a glance at the weekly chart above and monthly log chart below is needed to see that the market remains well within the bounds of the past four years’ lateral range that could continue indefinitely and that a breakout above Feb’18’s 1.2580 high is required to confirm a secular reversal higher.  Long-term players must also acknowledge the facts however that:

  • the extent and impulsiveness of Dec’16 – Feb’18’s rally broke the secular bear trend
  • Feb’18 – Mar’20’s survived retest of Mar’s 1.0671 low is an arguable (B- or 2nd-Wave) correction within a broader base/reversal process
  • historically bearish sentiment during 1Q20 is consistent with a broader base/reversal count.

HOW the market behaves “up here” in the 1.20-to-1.25-range will obviously be critical in the months ahead.  IF a secular base/reversal is what the market has in mind, it will be critical for the bull to sustain trendy, impulsive behavior up through, eventually, Feb’18’s 1.2580 high.  If, alternatively, a reversion to the middle-half bowels of the four year lateral range is the market’s destiny, then a confirmed bearish divergence in momentum would be expected from the upper-quarter of the range.  Herein lies the importance of a relatively tighter but objective longer-term bull risk parameter at 1.1758.

These issues considered, a bullish policy remains advised for long-term players with a failure below 1.1758 required to negate this call and warrant its cover.  Shorter-term traders whipsawed out of bullish exposure following 21-Aug’s bearish divergence in short-term mo are advised to re-establish a cautious bullish policy and exposure at-the-market (1.1985 OB) with a failure below 1.1887 required to threaten this specific call enough to warrant its cover.  In lieu of such weakness, further and possibly accelerated gains should not surprise.

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