After approaching mid-May’s key resistance around the 26.39-to-26.74-area late last week and Tue, the market’s total rejection of the extreme upper recesses of the past couple months’ range and gross failure below 13-Jun’s 24.69 low in the now-prompt Oct contract confirms AT LEAST the market’s continuation of a corrective/consolidative environment within the still-unfolding secular bull trend. BUT IF this market breaks the early-Jun lows and support ranging from 24.23 on an active-continuation basis to 24.01 basis the Oct contract, traders must acknowledge the prospect of a peak/reversal count that could be major in scope.
Only a glance at the 240-min chart below shows that the Oct contract has identified 11-May’s 26.39 high and 06-Jun’s 24.01 low as the absolutely pivotal boundaries of the past month’s range and key flexion points around which to toggle directional biases and exposure.
Moving out to a broader scale, the daily log active-continuation chart above shows the importance of 06-Jun’s low and support. On an active-continuation basis, this low is 24.23. Since rolling to the Oct contract earlier this week, that 06-Jun low is 24.01. Per such, we are defining this 24.01 low as the critical level we believe this market needs to hold to maintain a longer-term bullish count. A break below 24.01 exposes a vast area totally devoid of any technical levels of merit shy of former pper-21-handle-area resistance-turned-support from Feb. Especially given historically frothy levels of market sentiment/contrary opinion indicated by a current 86% reading in our RJO Bullish Sentiment Index shown in the weekly log chart below, traders are urged to neutralize all bullish exposure if/when this market fails below 24.01.
Given the magnitude of the secular bull trend, it is important to understand that a failure below 24.01 could still just be part of a (4th-Wave) correction ahead of an eventual resumption of the secular bull. HOWEVER, once below 24.01, ONLY a relapse-stemming bullish divergence in momentum will reject/define a reliable low and support from which to objectively conclude the end of a mere correction, prospective (5th-Wave) resumption of the secular bull and, most importantly, an objective risk parameter from which to resume bullish bets. In lieu of such a countering bullish divergence in momentum below 24.01, there is no way to know that the decline from Tue’s 26.19 high in the Oct contract isn’t the dramatic 3rd-Wave down of a major reversal lower.
These issues considered, shorter-term traders are advised to move to a neutral/sideline policy until/unless this market arrests the short-term relapse with a bullish divergence in momentum. Longer-term commercial players remain advised to maintain a bullish policy and exposure with a failure below 24.01 required to neutralize all bullish exposure in order to circumvent the depths unknown of a larger-degree correction OR major reversal lower.
