Posted on Dec 05, 2023, 11:03 by Dave Toth
Yesterday’s break below last week’s 168.625 low reaffirms the downtrend and major reversal from 19-Sep’s 196.60 high and leaves 29-Nov’s 173.875 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to arrest the meltdown and expose a corrective rebuttal higher that may be extensive in scope. Per such, we’re identifying 173.875 as our new short-term but key parameter from which the risk of a still-advised bearish policy and exposure can be objectively rebased and managed.
The daily (above) and weekly (below) log scale charts of the Feb contract shows the extent and impulsiveness of the past month-and-a-half’s 15% meltdown from 19-Sep’s 196.60 high that we believe is the initial 1st-Wave of a peak/reversal environment that could be as major as anything we have seen since 2014’s major top and reversal into a new 6-year secular bear market. As the forces that have driven a 3-1/2-YEAR secular bull market are unlikely to evaporate so quickly however, we want to keep a keen eye on MOMENTUM where a countering bullish divergence could expose a (2nd-Wave) corrective rebuttal to this decline that could be extensive in terms of both price and time.
Herein lies the importance of even a smaller-degree corrective high and short-term bear risk parameter like 173.875. Until and unless such minimal strength is shown however, the trend remains down on all practical scales and should not surprise by its continuance or acceleration straight away, especially with a still-frothy 77% reading in our RJO Bullish Sentiment Index that shows ample fuel for continued downside vulnerability as the Managed Money community is forced to capitulate its long-&-wrong exposure.
Lastly, the weekly log active-continuation chart below shows that by virtue of 23-Oct’s bearish divergence in WEEKLY momentum, the market has identified 19-Sep’s 192.05 high as the end of AT LEAST a textbook 5-wave Elliott sequence up from Jun’22’s 129.975 low and very possibly a massive 5-wave sequence from Apr’20’s 76.60 low. If this latter count is correct and until negated by a recovery above 192.05, a new multi-quarter or even multi-year bear market should not surprise.
These issues considered, a bearish policy and exposure remain advised with a recovery above 173.875 required to defer or threaten this count enough to warrant moving to a neutral/sideline position or even a cautiously bullish stance. Until/unless such strength is shown, further and possibly accelerated losses remain expected.