Tue’s break below 29-Aug’s 59.82 low reaffirms our longer-term bearish count and clearly leaves 05-Sep’s 64.45 high in its wake as THE corrective high and key risk parameter this market has got to recover above to, in fact, break the major downtrend. From a shorter-term perspective detailed in the hourly chart below, 08-Sep’s 61.07 low looks to be a very minor 1st-Wave low of a developing wave sequence down from 64.45 and a level that should contain any corrective recovery attempts within this slide. In this regard we’re considering 61.10 as our new short-term risk parameter to a still-advised bearish count.
Former 59.82-to-61.07-range support would be expected to hold as new resistance ahead of further losses.
The daily log scale chart above and daily close-only chart below show the flowing nature of this bear trend with late-Aug/early-Sep’s 3-wave, 38.2% retrace and rejection of former support-turned-resistance from the lower-64-handle as a textbook corrective component within the broader wave sequence down.
The weekly log close-only chart of the Oct contract below shows the market’s encroachment on the extreme lower recesses of the past YEAR’S range. If there’s a time and place for this clear and present downtrend to slow down and reverse, it would be in the period immediate ahead and above Sep’16’s 57-handle-area low. Herein lies the importance of identifying bear risk parameters like 61.10 and 64.45.
While the Bullish Consensus (marketvane.net) measure of market sentiment has certainly reflected the bearishness caused by a 2-1/2-month, near-20% meltdown however, the stubborn extent to which the Managed Money community has maintained its long-&-wrong bullish exposure remains a factor that could result in further and even accelerated losses. Indeed, at a still-frothy 81% reading reflecting 78.5K long positions reportable to the CFTC versus only 19K shorts, fuel for further downside vulnerability remains in ample supply. Forced capitulation of this exposure could result in a break of 2016’s low.
In sum, a bearish policy and exposure remain advised with strength above 61.10 required for shorter-term traders to step aside and further strength above 64.45 required for long-term players to take similar defensive action. In lieu of such strength we anticipate still further and possibly accelerated losses with former 59.82-to-61.07-range support considered new near-term resistance.