Posted on May 22, 2023, 08:58 by Dave Toth
In Thur’s Technical Webcast, we discussed the likelihood that 17-May’s “outside day down” in the Jun contract warned that mid-May’s recovery attempt was just another correction within the major bear trend, but that a relapse below 12-May’s 83.12 low was needed to render the recovery attempt from 09-May’s 82.72 low to last week’s 87.82 high a 3-wave and thus corrective structure. The hourly chart of the Jun contract below shows Fri’s relapse below 83.12 that confirms this bear market correction count, although the Jun contract has yet to break 09-May’s 82.72 low. As the futures market has rolled to Jul as the prompt month, establishing a new low in the Jun contract may or may not matter. In either event, 17-May’s 87.82 high remains intact as the latest smaller-degree corrective high and minimum level this contract needs to recoup to mitigate this bearish count and warrant defensive measures.
Moving ahead to the now-prompt Jul contract however, the hourly chart below shows Thur and Fri’s break below 12-May’s 84.12 low that confirms the resumption of the major bear trend as well as 16-May’s 88.75 high and 28-Apr’s 94.00 high as the latest smaller- and larger-degree corrective highs this contract is now required to recover above to threaten and then negate a bearish count and policy and warranting defensive measures. Per such, these levels serve as our new short- and longer-term parameters from which traders can objectively rebase and manage the risk of a still-advised bearish policy and exposure commensurate with their personal risk profiles.
The daily (above) and weekly (below) log scale charts of the Jul contract show the magnitude of the major bear trend that should not surprise by its continuance. This said, traders are advised to acknowledge the following as threats to this major downtrend:
- the prospect that the decline from 28-Apr’s 94.00 high is the completing wave to a major 5-wave sequence down from 27Dec22’s 109.97 high amidst
- historically bearish sentiment/contrary opinion levels and
- waning downside momentum on a daily scale.
On the heels of last week’s “outside WEEK down” however (higher high, lower low and lower close than the previous week’s range and close) that connotes weakness and vulnerability “down here”, it is critical to understand and require a confirmed bullish divergence in momentum above even a smaller-degree corrective high like 88.75 before considering these base/reversal-threat factors as applicable. Until and unless such even smaller-degree strength is proven, the trend is down on all practical scales and should not surprise by its continuance or acceleration straight away.
Finally and per this more immediate downside threat, the monthly log active-continuation chart below shows this market and a still-arguable trek towards the middle of the middle-half of its massive but lateral historical range that could see prompt contract month weakness to the 70-to-73-range in the months ahead. We never want to underestimate the greater odds of aimless whipsaw risk from the middle-half bowels of such an established range, BUT IF this market is NOT on a trek towards the 73-to-70-area in the months ahead, then it must PROVE “non-weakness” above levels like 88.75. And it must do so SOON. Until and unless it does, further and possibly steep losses should hardly come as a surprise.
These issues considered, a bearish policy and exposure remain advised in the now-prompt Jul contract with a recovery above 88.75 required for shorter-term traders to move to the sidelines and for even longer-term commercial players to pare exposure to more conservative levels. In lieu of such strength, further and possibly steep losses remain expected.