Posted on May 24, 2023, 07:42 by Dave Toth

Overnight’s break below 04-May’s 1042.7 low and our key longer-term bull risk parameter confirms a bearish divergence in daily momentum that exposes at least a larger-degree correction and possibly a more protracted reversal lower.  The 240-min chart below shows this weakness leaving Mon’s 1087.9 high in its wake as the latest smaller-degree corrective high and minimum level this market now needs to recoup to arrest this slide and expose a possible resumption of its major bull trend.

On a broader scale, the daily log chart above shows today’s failure below 1042.7 that confirms a bearish divergence in momentum that, in fact, breaks the uptrend from 27-Feb’s 903.9 low.  While the sell-off attempt from 21-Apr’s 1148.9 high certainly remains within the bounds of an intermediate-term correction within a still-arguable broader uptrend, the markets gross failure thus far to sustain Apr’s gains above Jan’s 1117 high amidst historically frothy levels in our RJO Bullish Sentiment Index shown in the weekly close-only chart below question the longer-term risk/reward merits of a continued bullish policy enough for even longer-term commercial players to neutralize bullish exposure in order to circumvent the depths unknown of a larger-degree correction or more protracted reversal lower.

These issues considered, a bearish policy remains advised for shorter-term traders with a recovery above 1087.9 required to threaten this call enough to warrant moving to a neutral/sideline position.  Longer-term players have been advised to move to a neutral/sideline position as a result of today’s failure below 1042.7 and are further advised to consider a cautious bearish stance with a recovery above at least 1087.9 and preferably 1148.9 required to threaten and then negate this call.  In lieu of a recovery above at least 1087.9, further and possibly protracted losses straight away should not surprise.