Overnight’s break below 27-Oct’s 3.0730 low reaffirms the developing downtrend from 16-Oct’s 3.2595 high consistent with our broader peak/reversal count introduced in 27-Oct’s Technical Blog following that day’s short-term momentum failure below 3.1380.  As a direct result of this resumed weakness the 240-min chart below shows that the market has identified 01-Nov’s 3.1830 high as the latest smaller-degree corrective high and level this market now needs to sustain losses below to maintain a more immediate bearish count.  Its failure to do so would render the sell-off attempt from the 3.2595 high a 3-wave and thus corrective affair consistent with the past and major 22-MONTH uptrend that would then be expected to continue.  In this regard 3.1830 is considered our new short-term risk parameter from which any non-bullish decisions like long-covers and cautious bearish punts can now be objective rebased and managed.

While the short-to-intermediate-term trend is clearly down, commensurately larger-degree proof of weakness below 22-Sep’s 2.8940 larger-degree corrective low and key risk parameter remains required to, in fact, break what is arguably a new secular bull market from Jan’16’s 1.9355 low.  The prospect that the entire Jan’16 – Oct’17 rally is a complete 5-wave Elliott sequence as labeled below contributes to a developing peak/reversal-threat environment that could be major in scope.  The fact that market sentiment levels have reached understandably historically frothy levels would also contribute to such a count.  But thus far the evidence down from 16-Oct’s 3.2595 high is simply insufficient to conclude a major correction lower.  This said however, for those will to take such a bearish leap of faith now rather than waiting for a break below 2.8940, the market has been very accommodative in defining two very reliable highs at 3.1830 and certainly 3.2595 from which the risk of such a leap can be objectively based and managed.

Only a glance at the monthly log scale chart below is needed to see that the 2011 – 2016 bear market has been broken.  With the market back to the middle of a 1.93-to-4.65-range that has constrained it for EIGHT YEARS, we don’t want to underestimate the improving odds of aimless whipsaw risk typical of such range-center environs that could wreak havoc for months or even quarters ahead as a result of the developing bearish threats cited above.

These issues considered, a cautiously bearish policy and exposure from 3.1400 OB recommended in 27-Oct’s Trading Strategies Blog remain advised with protective buy-stops trailed to levels just above 3.1830.  In lieu of such 3.1830+ strength we anticipate further and possibly accelerated losses straight away with little support seen between spot and 22-Sep’s 2.8940 low.