In Mon’s Technical Blog we identified 21-Jun’s 75.82 corrective high as our short-term risk parameter the market needed to sustain losses below to maintain a more immediate bearish count. Its failure to do so yesterday confirms a bullish divergence in momentum that defines Mon’s 73.27 low as the END of a textbook 5-wave Elliott sequence down from 14-Jun’s 80.00 high and our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.

The intriguing thing here is that this bullish divergence in admittedly short-term momentum stems from the extreme lower recesses of the past three months’ range shown in the daily (above) and daily close-only (below) charts of the Aug contract where it’s not beyond the realm of possibility that the past couple weeks’ decline is the completing 5th-Wave “failure” (meaning the 5th-wave did not break the 3rd-wave low which, in this case, is the early-Apr low) of the long-term downtrend from the Jan high. The potential for a “double-bottom” reversal pattern is also obvious.
As always, we cannot and will not conclude a broader base/reversal count based on only smaller-degree strength, but the facts stated above amidst historically bearish sentiment present a compelling base/reversal case that includes smaller-degree risk to levels below Mon’s 73.27 intra-day low and/or Mon’s 73.67 low daily close. Until those lows are violated, we believe this market is prone to at least another intra-3-month-range recovery and possibly a broader reversal.

On a weekly close-only basis the chart below shows a new and possible completing 5th-wave low below late-Mar’s 75.50 low amidst waning downside momentum and some of the most bearish sentiment levels in FIVE YEARS. This condition warns of a vulnerability to higher levels.

On an even broader monthly scale of the most active futures contract below, the market remains deep within the middle-half bowels of its historical range where the odds of continued aimless whipsaw risk should be considered high, requiring a more conservative approach to risk assumption. Herein lies the importance of identifying tighter yet objective risk parameters like Mon’s 73.27 low.

These issues considered and while acknowledging commensurately larger-degree strength above 14-Jun’s 80.00 next larger-degree corrective high and key risk parameter as the level the market needs to recoup to break this year’s broader downtrend, we believe current 74.85-area levels or better provide a favorable risk/reward opportunity from the bull side with a failure below 73.27 required to negate this call and warrant its cover. In lieu of such sub-73.27 weakness we anticipate at least a more significant intra-3-month-range rebound and quite possibly a much more protracted reversal higher. A failure below 73.27 reinstates the bear ahead of what could be steep losses thereafter.