While the past week’s relapse is still dwarfed by the past couple months’ uptrend, we believe overnight’s relapse below Thur’s 1319.5 low contributes to a peak/reversal-threat environment introduced in Thur’s Technical Webcast. As a direct result of this resumed weakness the 240-min chart below shows that the market has identified Fri’s 1338.2 high as the latest smaller-degree corrective high the market is now minimally required to recoup to arrest the slide from 08-Sep’s 1362.4 high, render it a possible 3-wave and thus corrective affair and re-expose the 2-month uptrend. In lieu of such 1338.2+ strength AT LEAST the intermediate-term trend is down and should not surprise by its continuance or acceleration. In this regard 1338.2 is considered our new short-term risk parameter from which non-bullish decisions like long-0covers and cautious bearish punts can now be objectively based and managed.
Basis a daily log scale chart above, the past week’s sell-off attempt thus far remains well within the bounds of a mere correction relative to the past couple months’ $158 rally from 10-Jul’s 1204 low where the market has yet to retrace even a Fibonacci minimum 38.2% of the rally to the 1300-area that is also home to a ton of former resistance that identifies this 1300-area as a key support candidate. This said however, the combination of the market’s rejection of the extreme upper recesses of the past year’s 1377 – 1124-range amidst the highest bullish sentiment in nearly five years cannot be ignored as a severe threat to the bull.
Indeed, the current 95% in our RJO Bullish Sentiment Index reading reflecting a whopping 278K Managed Money long position reportable to the CFTC versus only 13K shorts has warned of and accompanied major peak/reversal environments in the past and cannot now be ignored as a warning of a current larger-degree correction or reversal lower as long as recent highs at 1338.2 and especially 08-Sep’s 1362.4 high remain intact.
These issues considered, shorter-term traders remain advised to maintain a cautious bearish policy with strength above 1338.2 required to defer or threaten this call enough to warrant moving to a neutral/sideline position. Longer-term players are advised to neutralize any remaining bullish exposure and move to a cautious bearish policy from current 1315-area prices OB with strength above 1338.2 required to pare this exposure and subsequent strength above 1362.4 required to negate it and resurrect the major bull. We will be watchful for a bullish divergence in short-term mo around the critical 1300-area that would tilt the shorter-term directional scales back to the bull side. A clear break below the 1300/1298-area could expose severe losses thereafter however.
With the exception of the silver market currently only sitting in the middle of its past year’s range, the technical construct and expectations of the silver market are similar to those detailed above in gold with today’s resumed weakness leaving Fri’s 17.915 high in its wake as the latest smaller-degree corrective high the market is now minimally required to recoup to arrest the clear and present intermediate-term downtrend, expose it as a 3-wave and thus corrective affair and resurrect the past couple months’ broader uptrend. In lieu of such 17.915+ strength and with the recent sharp return to historically frothy sentiment levels, this market might have become vulnerable to a more extensive, if intra-range relapse.
The daily log scale chart above shows the market’s encroachment on former 17.24-area resistance from early-Aug that would be expected to hold IF the past week’s relapse is merely a correction with the broader uptrend. The threat to the bull clearly stems from the sharp run-up to a 93% reading in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC. Reflecting 81K longs too just 6K shorts, this indicator warns of downside vulnerability that could be extensive now that the market has, in fact, broken at least Aug-Sep’s portion of the 2-month uptrend.
These issues considered, shorter-term traders are advised to maintain a cautious bearish policy with strength above 17.915 required to negate this call and warrant its cover. Longer-term players are advised to move to a cautious bearish policy and first approach recovery attempts to the 17.60-area OB as corrective selling opportunities with a recovery above 17.915 threatening this call enough to warrant a move to the sidelines. In lieu of at least such 17.915+ strength, further and possibly steep losses should not surprise.