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Posted on Jan 24, 2023, 08:47 by Dave Toth
After posting a new high for the 2-1/2-month recovery last week above 12-Jan’s 96.29 high, the 240-min chart of the Mar24 SOFR contract below shows flagging price action and the market’s now-close proximity to 17-Jan’s 96.08 smaller-degree corrective low it needs to sustain gains above to avoid breaking the uptrend from 06-Jan’s 95.73 larger-degree corrective low. As a result of last week’s new highs, 17-Jan’s 96.08 low serves as our short-term bull risk parameter pertinent to shorter-term traders with tighter risk profiles. A failure below 96.08 will warrant a move to a neutral/sideline position as the depths of a bigger correction or reversal below 96.08 are indeterminable, with no levels of any technical merit below 96.08 shy of 06-Jan’s 95.73 low.
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On a broader scale, our major base/reversal count remains predicated on a unique and compelling list of technical facts that include:
- 15-Nov’s bullish divergence in daily momentum above 28-Oct’s 96.01 corrective high that completed a textbook 5-wave Elliott sequence down from 06-Jul’s 97.62 high.
- last week’s break above 14-Dec’s 96.28 initial counter-trend high that confirms a bullish divergence in WEEKLY momentum.
- recent (Nov) lows (21%) in the Bullish Consensus (marketvane.net) that were the lowest in 16 YEARS.
- an arguably complete and massive 5-wave Elliott sequence down from Aug’20’s 99.965 high weekly close (below) in which
- the suspected completing 5th-Wave down from 29-Jul’s 97.50 (4th-Wave) corrective high weekly close came within 1.5-bps of the (95.48) 0.618 progression of the net distance of Waves-I-thru-III (99.965 – 96.695), and as well discuss below…..
- the market working an “outside MONTH up” this month (higher high, lower low and prospective higher close than Dec’22’s range and close.
Per this broader base/reversal count, the daily chart above shows 06-Jan’s 95.73 low to be the latest larger-degree corrective low. The rally from that low is either the 3rd-Wave of an eventual and more protracted 5-wave sequence up OR the completing C-Wave of a correction ahead of a prospective resumption of the secular bear market. And while a break below 04-Nov’s 95.30 low is certainly required to negate any bullish count and reinstate the secular bear, we’re defining 95.73 as our key longer-term parameter from which longer-term institutional players can objectively base non-bearish decisions like short-covers and new bullish exposure.
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On an even broader scale, the monthly chart below shows the “outside month up” the market is working on this month, waning downside momentum, historically bearish sentiment levels and an arguably textbook 5-wave Elliott sequence down from Aug’20’s 99.895 intra-week high. Again, this is a compelling and extensive list of technical facts and observations that warns of a base/reversal threat that could be major in scope. But if this is what the market has in store for us, then it needs to BEHAVE LIKE A BULL and sustain trendy, impulsive behavior higher and above larger-degree corrective lows like 95.73. Its failure to do so could easily re-expose a downtrend that has been the dominant technical event for over two years.
These issues considered, a bullish policy and exposure are advised with a failure below 96.08 required for shorter-term traders to move to the sidelines. Commensurately large-degree weakness below 95.73 is advised for longer-term institutional players to follow suit.
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