Posted on Nov 16, 2022, 09:47 by Dave Toth

In Mon’s Technical Webcast we discussed 09-Nov’s 72.11 low as the latest smaller-degree corrective low and short-term but key level the market needed to sustain gains above to maintain a more immediate bullish count.  The hourly chart below shows this morning’s failure below 72.11, confirming a bearish divergence in very short-term momentum.  This mo failure is of too minor a scale to CONCLUDE Fri’s 75.94 high as the end of a 5-wave Elliott sequence from 28-Sep’s 60.11 low as labeled below.  But it IS sufficient to identify Fri’s 75.94 high as one of developing importance and a short-term risk parameter from which to objectively base non-bullish decisions like long-covers and new bearish punts.  And given compelling ancillary peak/reversal-threat evidence discussed below, both short- and long-term traders are advised to neutralize any/all bullish exposure and move to a neutral-to-cautiously-bearish policy with a recovery above 75.94 required to negate and reverse this call.

While today’s bearish divergence is of an admittedly very short-term scale, the compelling factors below warn that today’s short-term weakness could be the start of a correction or reversal lower that could morph into one of considerable scale:

  • the market’s proximity to the extreme upper recesses of this year’s range amidst
  • historically skewed bullish sentiment/contrary opinion by the hot Managed Money community
  • an arguably complete 5-wave Elliott sequence from 28-Sep’s 60.11 low that might have completed a
  • 3-wave and thus (major 2nd-Wave) correction of Jun-Jul’s 78.78 – 54.29 (suspected major 1st-Wave) decline
  • waning upside momentum over the past YEAR around 2008’s previous all-time high of 72.69.

Indeed, at a current 95% reading reflecting a whopping 111.5K Managed Money long positions versus just 6K shorts, fuel for downside vulnerability is in ample supply.  This same technical condition existed back in mid-Jun before the market melted down by 31%.  Until and unless this market recoups at least Fri’s 75.94 high or negates a major peak/reversal process altogether by recovering above 08-Jun’s 78.78 high, such a more protracted decline should not come as a surprise in the weeks and months ahead.

These issues considered, both short- and long-term traders have been advised to neutralize any/all bullish exposure as a result of this morning momentum failure and are further advised to move to a cautious bearish stance on a scale-up from current 72.75-area prices to 74.35 with a recovery above 75.95 negating this call and warranting its cover.  In lieu of such 75.94+ strength, we anticipate further lateral-to-lower, and possibly much lower prices in the days, weeks and possibly even months ahead.

RJO Editorial Team