Posted on May 18, 2023, 11:46 by Dave Toth

Today’s sharp rally above not only Tue’s 2.470 high but also 19-Apr’s 2.543 high reaffirms the interim bullish count discussed in 12-May’s Technical Blog by confirming a bullish divergence in daily momentum.  On an intra-day basis, the 240-min chart below shows that this continued recovery leaves yesterday’s 2.322 low in its wake as the latest smaller-degree corrective low this market is now minimally required to fail below to diffuse a more immediate bullish count.  Per such, this 2.322 level serves as our new short-term parameter from which shorter-term traders can objectively rebase and manage the risk of non-bearish decisions like short-covers and cautious bullish punts.

The daily log chart above shows the bullish divergence in daily momentum above 2.543 that, in fact, breaks Mar-May’s portion of the secular bear trend.  Combined with historically bearish levels in the Bullish Consensus ( measure of market sentiment/contrary opinion AND the possibility that 14-Apr’s 1.946 low might have completed a massive 5-wave Elliott sequence down from last year’s 10.028 high, traders are advised not to underestimate the extent to which this market might be vulnerable to recovering, either in a larger-degree correction OR a major reversal higher.  To CONCLUDE the end of a major 5-wave sequence down from last year’s high however, commensurately larger-degree strength above 03-Mar’s 3.027 larger-degree corrective high remains required.  This scale difference leaves us with the not unusual challenge of determining whether this recovery is a correction or a reversal.

Finally and on an even longer-term monthly log active-continuation basis, we’ve discussed for a number of weeks now the market’s return to the lower-quarter of its massive historical range that puts the easy downtrending environment behind us and presents us with the challenging and NON-trending correction-vs-reversal environment.  Such an environment is likely to be characterized by highly volatile price action that warrants a more conservative approach to directional risk assumption.  This approach places emphasis on tighter risk definition like yesterday’s 2.322 low.

These issues considered, a cautious bullish stance remains advised for shorter-term traders with a failure below 2.322 required to move to a neutral/sideline position.  Longer-term commercial players are advised to pare bearish exposure to more conservative levels and jettison remaining exposure on a recovery above 3.027 in the prompt contract.

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