Overnight’s break below last week’s 171.45 low is consistent with and reaffirms our bearish count introduced in 25-Aug’s Trading Strategies Blog and leaves Thur’s 172.48 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to break the slide. In this regard, this 172.48 level serves as our new short-term risk parameter from which a still-advised bearish policy and exposure can be objectively rebased and managed.
The daily close-only chart below shows the trendy, impulsive decline from 05-Aug’s 174.36 high in the now-prompt Dec contract as well as the developing POTENTIAL for a bullish divergence in momentum that will be CONFIRMED to the point of non-bearish action on a close above Thur’s 172.45 corrective high close or a trade above that day’s 172.48 intra-day high. Until and unless such strength is shown, at least the intermediate-term trend and possibly the long-term trend remains down and should not surprise by its continuance or acceleration.
Another update to our daily chart above is that the extent and 5-wave-looking impulsiveness of the decline from the early-Aug high is that it allows us to better speculate that that high is the END of a 3-wave and thus corrective event from 17-May’s 167.12 low even though the market has not yet confirmed such a count by breaking 11-Jun’s 170.13 high. Especially stemming from the extreme upper recesses of the massive two-year lateral range shown in the weekly log active-continuation chart below, it’s harder to contemplate the past six weeks’ sell-off as a 4th-Wave correction rather that the (A- or 1st-Wave) start to a bigger move south. This said, the challenge that remains from the lateral, two-year prison are the greater odds of aimless whipsaw risk typical of such range-center environs where a more conservative approach to risk assumption is warranted. Herein lies the importance of identifying a tighter but objective risk parameter like 172.48.
These issues considered, a bearish policy and exposure remain advised with a recovery above 172.48 required to negate this specific all and warrant its cover. In lieu of such strength, further and possibly accelerated losses remain expected.