While the market has yet to fail below 12-Aug’s 57.55 low and our short-term risk parameter needed to confirm this month’s recovery attempt as a 3-wave and thus corrective event consistent with our still-arguable long-term bearish count, the market slipped enough yesterday to identify yesterday’s 60.25 high as one of developing importance and prospect end or upper boundary to a correction up from 05-Aug’s 57.26 low. In this regard we’re considering 60.25 a micro risk parameter from which a bearish punt from at-the-market (59.40 OB) can be objectively based and managed. If correct, this count would call for a resumption of the major downtrend to new lows below 57.26, making this a favorable risk/reward bet.
The dominance of the 14-month downtrend is clear in the weekly log chart below. Market sentiment levels are understandably at historically bearish levels that ultimately will warn of and accompany a major BASE/reversal environment. But traders are reminded that sentiment/contrary opinion is not an applicable technical tool in the absence of a confirmed bullish divergence in momentum of a scale sufficient to break the major downtrend. Herein lies the importance of 25-Jul’s 64.68 next larger-degree corrective high and key long-term risk parameter.
These issues considered, a bearish policy remains advised for long-term players with a recovery above 64.68 required to negate this call and warrant its cover. Shorter-term traders with tighter risk profiles whipsawed out of bearish exposure following 08-Aug’s bullish divergence in short-term mo are advised to re-establish bearish exposure at-the-market (59.40 OB) with a recovery above 60.25 required to negate this specific all and warrant its cover. In lieu of such 60.25+ strength we anticipate a resumption of the major bear to new lows below 57.26.