Today’s clear break above Mon’s 70.78 initial counter-trend high confirms a bullish divergence in momentum that identifies 13-Sep’s 68.88 low as one of developing importance and our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed. Against the backdrop of the secular bear market however, today’s display of “non-weakness” is of a grossly insufficient SCALE to conclude anything more than another interim (perhaps 4th-wave) corrective rebound.
Indeed, the daily chart below shows this rebound still below a key area of former support around the 72.08-area from mid-Jul that, since demolished in early-Sep, now serves as a key new resistance candidate. To truly threaten the secular bear trend, commensurately larger-degree strength above 02-Aug’s 76.96 larger-degree corrective high and key long-term bear risk parameter remains MINIMALLY required.
This presents a not uncommon reversal-vs-correction debate and challenge where the technical and trading issue of SCALE is a key consideration. In effect, the short-term trend is up within the still-arguable long-term downtrend. Shorter-term traders are advised to make non-bearish decisions like short-covers and cautious bullish punts until negated by a relapse below 68.88 while it is premature for longer-term institutional players to veer from a bearish tack.
Moving out to a weekly log chart above, s it possible that Aug-Sep’s portion of the secular bear COMPLETED the 5th-Wave of a secular bear trend from Jan’21’s 97.55 high? Yes. But it is grossly premature to CONCLUDE such until and unless this downtrend is broken by a commensurately larger-degree bullish divergence in momentum above 76.96. The fact that, on a USDJPY cash basis shown in the monthly log chart below, the USD has reached the extreme upper recesses and prospective resistance of a range that spans the past 30 YEARS raises the awareness and importance of a prospective top in the USD that could be massive in scope. But major reversal processes are NEVER concluded from proof of just short-term behavior like today’s contract recovery above 70.78.
These issues considered, shorter-term traders are advised to move to a neutral/sideline position in order to circumvent the heights unknown of a correction or reversal higher. We will be watchful for a countering bearish divergence in short-term mo, especially around the lower-72-handle-area, to reject/define the prospective upper boundary of a (4th-wave) correction ahead of a resumption of the secular bear and a possible return to a bearish policy. Longer-term players are OK to pare bearish exposure to more conservative levels, with commensurately larger-degree strength above 76.96 still required to break the secular bear trend and warrant neutralizing remaining bearish exposure. In lieu of such larger-degree strength, a resumption of the secular bear trend to new lows below 68.88 should not surprise.