While the past few days’ rebound is not unimpressive and certainly confirms the short-term trend as up following Mon’s poke above last Thur’s 74.25 initial counter-trend high, against the backdrop of 1Q18’s meltdown this rebound is advised to first be approached as a correction ahead of resumed losses rather than the start of a more significant reversal higher. The hourly chart below shows that this rebound did trickle above 28-Mar’s 76.92 high we advised as a short-term risk parameter to a bearish policy, but for reasons below traders are advised to require further gains above yesterday’s 77.00 intra-day high or a close above 28-Mar’s 76.62 corrective high close to threaten a continued bearish count enough to warrant its cover.

For scalpers, a cautious bullish punt from former 74.25-area resistance-turned-support is OK with a failure below Fri’s 72.35 low and micro risk parameter required to negate that call.

The factors that reinforce a bearish count that contends this recent rebound is (4th-Wave) corrective include:

• yesterday’s high coming within a few ticks of the (77.06) 50% retrace of a suspected 3rd-Wave decline from 83.87 to 70.25 in the daily chart above
• Mon’s 75.77 high close falling a few ticks shy of a Fibonacci minimum 38.2% retrace of Feb-Apr’s suspected 3rd-Wave decline
• this rebound falling well within the broader down-channel and easily within the bounds of such a mere correction
• the 3-wave appearance (thus far) of the recovery from 04-Apr’s 70.25 low to yesterday’s 77.00 high as labeled in the hourly chart (top).

There’s no question that threats to the bear market are forming, including the developing potential for a bullish divergence in daily momentum (above) amidst a return to historically bearish levels of market sentiment shown in the weekly log close-only chart of the Jun contract below. Indeed, at a current 52% level our RJO Bullish Sentiment Index is at its lowest level in three years. But traders are reminded that sentiment is not an applicable technical tool in the absence of a confirmed bullish divergence in momentum of a scale sufficient to break the broader downtrend. And we believe herein lies the importance of requiring commensurately larger-degree strength above at least 77.00 and preferably a close above 76.62 needed to, in fact, break the major downtrend.

These issues considered, a bearish policy and exposure remain advised ahead of an expected resumption of the major bear trend to at least one more round of new lows below 70.25. An intra-day move above 77.00 or a close above 76.62 will suffice in threatening this call enough to warrant its cover and consideration of a move to the bull side.