In last Thur’s Technical Blog we introduced some longer-term peak/reversal-threat elements ignited by that day’s bearish divergence in admittedly short-term momentum, acknowledging the scale fact that that mo failure was of too minor a scale to conclude anything more than another interim corrective hiccup within the secular bull trend. One cannot conclude a major top from proof of only short-term weakness. This morning’s clear, impulsive break below last Thur’s 8.016 initial counter-trend low however is the next larger-degree scale step that contributes to a larger-degree correction or reversal lower.
As a direct result of today’s continuation of the past week’s setback, the 240-min chart below shows that the market has identified Fri’s 9.149 high as the latest smaller-degree corrective high. A recovery above 9.149 is required to render the sell-off attempt from 08-Jun’s 9.664 high a 3-wave and thus corrective structure that would then re-expose the secular bull. Until such strength is proven, the decline from 9.149 looks to be that of a smaller-degree 3rd-Wave of an eventual 5-wave sequence down that would be a smaller-degree but contributing factor to a broader peak/reversal count. Per such, this 9.149 level becomes our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of non-bullish decisions like long-covers and bearish punts.
From a long-term perspective, it remains clear that commensurately larger-degree weakness below 10-May’s 6.521 larger-degree corrective low remains required to confirm a bearish divergence in momentum of a (WEEKLY) scale sufficient to break at least the portion of the secular bull trend from 30Dec21’s 3.536 low and possibly complete a massive 5-wave Elliott sequence from Jun;’20’s 1.517 low. BUT we believe the extent and impulsiveness of today’s resumption of last week’s initial (suspected minor 1st-Wave) decline raises the odds of a broader peak/reversal PROCESS that could span weeks.
Indeed, a larger-degree failure below 6.521 would only satisfy the first and likely second of our three key reversal requirements (a confirmed bearish divergence in momentum and trendy, impulsive 5-wave behavior on the initial decline). The third reversal requirement- proof of 3-wave corrective behavior on a subsequent recovery/retest of the high- could be extensive and span weeks.
These issues considered, a neutral-to-cautious-bearish policy remains advised for shorter-term traders with a recovery above 9.149 required to negate this call and re-expose the secular bull. Longer-term commercial players are advised to pare bullish exposure to more conservative levels and jettison remaining exposure on a failure below 6.521 which, at that point, would reaffirm a peak/reversal count that we believe will likely be major in scope.