Overnight’s recovery above 15-Jan’s 91.38 corrective high and short-term risk parameter discussed in the 17-Jan’s Technical Blog confirms a bullish divergence in momentum. This momentum failure defines 17-Jan’s 90.93 low as the END of a textbook 5-wave Elliott sequence down from 06-Jan’s 93.15 high and start of at least a corrective rebuttal higher. Per such, that 90.93 low serves as our new short-term risk parameter from which non-bearish decisions like short-covers, pared shorts or cautious bullish punts can now be objectively based and managed.
From an even smaller degree, yesterday’s 91.06 low serves as a micro risk parameter the market needs to sustain gains above to maintain a more immediate bullish count. Its failure to do so will render the recovery from that 90.93 low the 3-wave and thus corrective event we suspect it to be.
From a broader perspective, 06-Jan’s 93.15 next larger-degree corrective high remains intact as our key long-term risk parameter the market is required to recoup to break the broader, if intra-five-year-lateral-range downtrend from 26Aug19’s 95.89 high. The daily chart above also shows former 91.60-to-91.70-area support from mid-to-late-Dec as a new near-term resistance candidate. IF some broader downtrend to the lower recesses of the multi-year range is what the market has in store, and it’s truly weak and vulnerable, then we’d suspect this mid-to-upper-61-handle to contain corrective rebound attempts. Subsequent relapse below 91.06 and certainly 90.93 will reinforce such a count and potentially steep losses in the weeks and months ahead. A clear, impulsive break above the roughly 91.75-area won’t necessarily negate a broader bearish count, but it would certainly reinforce a call for at least a more significant correction or possible reversal higher.
Traders are reminded that from a long-term perspective, the weekly chart below shows the market’s position deep within the middle-half bowels of this massive, multi-year lateral range where the odds of aimless whipsaw risk are advised to be approached as higher, warranting a more conservative approach to risk assumption. Under such range-center conditions, smaller-degree but objective risk parameters like 90.93 are golden.
These issues considered, shorter-term traders have been advised to neutralize bearish exposure and are even OK to take a cautious punt from the bull side from 91.40 OB with a relapse below 90.93 required to negate this call and warrant its cover. Long-term players are advised to pare bearish exposure to more conservative levels with commensurately larger-degree strength above 93.15 still required to negate a long-term bearish count and warrant its complete cover. For those for whom a 93.15 risk assumption is too great, we’d suggest neutralizing remaining exposure on strength above 91.75.