Today’s break above not only last week’s 2.783 high, but also 19-May’s 2.885 larger-degree corrective high reaffirms this month’s uptrend and confirms a bullish divergence in WEEKLY momentum. The 240-min chart below shows what appears to be a textbook 5-wave Elliott sequence up from 01-Jun’s 2.244 low in the Aug contract. Combined with the bullish divergence in weekly momentum we’ll discuss below, the market has satisfied the first two of our three key reversal requirements.
On a shorter-term basis, Fri and today’s break above 20-Jun’s 2.783 high leaves last week’s 2.527 low in its wake as the latest smaller-degree corrective low this market is now minimally required to fail below to break this month’s developing uptrend. Per such, this 2.527 level serves as our new short-term parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of an advised bullish policy and exposure.
The daily log scale chart of the Aug contract shows today’s break above 19-May’s 2.885 larger-degree corrective high that confirms a bullish divergence in weekly momentum (below) and confirms our broader base/reversal count introduced in 15-Jun’s Technical Blog following that day’s bullish divergence in daily momentum. Combined with historically bearish sentiment/contrary opinion levels in the Bullish Consensus (marketvane.net), an arguably textbook and massive 5-wave Elliott sequence down from Aug’22’s 10.9028 high as labeled below, AND the market’s engagement of and rejection thus far of the lower-quarter of its 25-YEAR historical range, the elements typical of a major base/reversal environment are in place.
Above, we mentioned that this market as satisfied two of our three key reversal requirements: a confirmed bullish divergence in weekly momentum and proof of 5-wave impulsive behavior on the initial counter-trend recovery. These are sufficient to threaten a broader bearish count and warrant neutralizing all previously recommended long-term bearish exposure by longer-term commercial players in order to circumvent the heights unknown of a suspected initial counter-trend move. To institute a new bullish policy, the third reversal requirement of proof of 3-wave corrective behavior on an expected relapse attempt has yet to be satisfied.
Base/reversal PROCESSES typically include a countering 3-wave corrective rebuttal to the initial counter-trend rally as the forces that have driven an 8-month, 80% meltdown in nat as prices are unlikely to evaporate quickly, but rather over TIME. Only a quick glance at 2020’s base/reversal behavior shown below is needed to see the corrective relapses early in the overall reversal before what became a 26-month, 561% price explosion.
Under such typical base/reversal processes, “chasing” initial counter-trend strength typically presents poor risk/reward metrics unless bulls are OK with shorter-term whipsaw risk. For to negate or even threaten this major base/reversal count, this market now needs to break 01-Jun’s 2.244 low in the Aug contract (or that day’s 2.136 low on an active-continuation basis). And herein lies the importance of identifying a smaller-degree corrective low like 2.527 currently as a short-term parameter from which non-bearish decisions like short-covers and bullish punts can be objectively based and managed. A failure below 2.527 is currently minimally required to confirm at least that larger-degree (B- or 2nd-wave) correction or resumption of the secular bear trend.
The monthly log chart below shows the market’s engagement and rejection thus far of the lower-quarter of this market’s multi-decade historical range that, along with historically bearish sentiment levels, a bullish divergence in weekly momentum and an arguably complete 5-wave sequence down from Aug’22’s 10.028 high conspire on a base/reversal-threat environment that could be major in scope. And now that the market has rejected/defined more reliable lows and support that serve as new bull risk parameters, we have levels from which to objectively navigate the risk of betting on a reversal higher.
These issues considered, a bullish policy remains advised for shorter-term traders with a failure below 2.527 required to defer or threaten this call enough to warrant moving to the sidelines. Longer-term players have been advised to neutralize any/all remaining bearish exposure and move to a neutral/sideline position to circumvent the heights unknown of a more protracted correction or reversal higher. We will be watchful for a corrective relapse in the weeks ahead for a preferred risk/reward opportunity from the bull side ahead of a reversal higher that could be major in scope.