The market’s failure overnight to sustain recent losses below 29-Sep’s 1.1833 corrective high and short-term risk parameter stems the recent decline at 1.1669 and identifies that low as the obvious short-term risk parameter the market is now required to break to reinstate the decline and reinforce a peak/reversal count that we believe could be major in scope. At this juncture it is indeterminable whether the past month’s sell-off attempt from 08-Sep’s 1.2092 high is a complete 3-wave and thus corrective structure ahead of a resumption of 2017’s major uptrend OR the early stages of a peak/reversal count that suggests the current rebound is another corrective selling opportunity ahead of further and potentially significant, multi-month losses.
Given the magnitude of this year’s major uptrend shown in the daily (above) and weekly (below) log scale charts, the past month’s sell-off attempt falls well easily within the bounds of a BULL market correction. This is what makes today’s bullish divergence in momentum so important. Until the market relapse below 1.1669, we could see an impulsive 5th-Wave resumption of the bull straight away and to new highs above 1.2092. If, alternatively, 08-Sep’s 1.2092 high did, in fact, complete the 5-wave sequence from Jan’s 1.0341 low as labeled, then by definition this current pop would be expected to peter out somewhere shy of 20-Sep’s 1.2034 high via a countering, confirmed bearish divergence in short-term mo, perhaps even around today’s 1.1846 high and the (1.1851) 50% retrace of the decline from 20-Sep’s 1.2034 high to Fri’s 1.1669 low detailed in the 240-min chart (top).
There’s a lot of “if-then” stuff going on currently, but this is the nature of the beast when trying to negotiate the typical correction-vs-reversal dilemma.
We would remind traders of the very long-term reasons we’re concerned about an interim but major peak/reversal environment:
- the market’s proximity to HUGE former support from the 1.20-area that, since broken in Jan’15, serves as a new major resistance candidate
- this fact is reinforced by the (1.2029) 50% retrace of the decline from May’14’s 1.3993 high to Jan’17’s 1.0341 low
- a confirmed bearish divergence in momentum that identifies 08-Sep’s 1.2092 high as one of developing importance and potentially the end of a
- complete 5-wave Elliott sequence from Jan’s 1.0341 low to 08-Sep’s 1.2092 high amidst
- frothy sentiment levels not seen since those that warned of and accompanied the 2014-15 collapse.
From an even longer-term perspective, we believe this year’s rally is just the initial (A- or 1st-Wave) rally in a huge, multi-year base/reversal count to levels well above 1.20. But given that 2017’s rally would be just the initial rally in such an environment, the thing that’s still missing is a typically extensive (B- or 2nd-Wave) correction lower within the major base/reversal PROCESS that’s trying to reverse a secular 8-1/2-year bear. The fundamental and technical forces that drove that bear for so long just don’t evaporate in a few quarters, but rather take TIME to change. This is, fundamentally, what technical 2nd-waves and right-shoulders are all about. And until this market recoups 08-Sep’s 1.2092 high, it is such a B- or 2nd-Wabe correction lower that we believe could drive prices to the 1.12-to-1.10-range over the course of the next 3-to-5-months.
These issues considered, shorter-term traders have been advised to move to a neutral/sideline position following today’s recovery above 1.1833. Longer-term players are OK to pare bearish exposure to more conservative levels, with commensurately larger-degree strength above 1.2092 required to negate this peak/reversal call altogether and warrant its complete cover. We will be watchful for a bearish divergence in short-term momentum in the days immediately ahead that would tilt the short-term directional scales lower and perhaps resurrect the broader bearish count.