Posted on Jan 08, 2024, 08:07 by Dave Toth

Overnight’s break below 15-Dec’s 2092.2 corrective low confirms mid-to-late-Dec’s recovery attempt as a 3-wave and thus corrective affair we discussed in 03-Jan’s Technical Webcast and leaves smaller-degree corrective highs in its wake at 2071.1 and especially 2098.2 that this market is now required to recover above to threaten and then negate a more immediate bearish count.  Left unaltered by a recovery above 2098.2, Decs 3-wave, corrective recovery attempt warns of a resumption of early-Dec’s downtrend that preceded it to new lows below 13-Dec’s key 1987.9 low.  And if that low is broken, there are NO levels of any technical merits shy of 13-Nov’s 1935.6 low.  Per such, 2071.1 and 2098.2 serve as our new mini and short-term but key parameters from which traders can objectively base non-bullish decisions like long-covers and cautious bearish punts.

The daily log chart above shows the vital importance of 13-Dec’s 1987.9 larger-degree corrective low, the break of which will render that low an initial counter-trend low and confirm a bearish divergence in WEEKLY momentum.  This would, in fact, break at least Oct-Dec’s uptrend.  And given 1) the market’s gross failure to sustain early-Dec’s “breakout” to new all-time highs amidst 2) historically frothy sentiment/contrary opinion levels as evidence by the current 81% reading in our RJO Bullish Sentiment Index, the market’s downside potential below 1987.9 could be extensive.

Indeed, the 81% reading in our RJO BSI reflects a whopping 179K Managed Money long positions reportable to the CFTC versus only 42K shorts.  Such a larger-degree/weekly momentum failure below 1987.9 would/could force the capitulation of this bullishly-skewed exposure, exacerbating the decline.

These issues considered, a neutral-to-cautiously-bearish policy remains advised for shorter-term traders with a recovery above at least 2071.1 required to defer or threaten this call and warrant defensive measures.  Longer-term commercial players have been advised to pare bullish exposure to more conservative levels and are further advised to move to a neutral/sideline position on a break below 1987.9 ahead f what could be extensive losses thereafter.

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