Posted on Oct 16, 2023, 07:33 by Dave Toth
Overnight’s recovery above 02-Oct’s 3525 smaller-degree corrective high and our short-term bear risk parameter discussed in 09-Oct’s Technical Webcast confirms the bullish divergence in momentum needed to define 06-Oct’s 3337 low as the end of the decline from 15-Sep’s 3763 high. Given the backdrop of what has been a secular bull market, we cannot ignore the possibility and count calling for a (5th-Wave) resumption of the major bull to new highs above 3763. For a number of reasons we’ll discuss below however, not the least of which is what appears to be a textbook 5-wave sequence down from that 3763 high to 06-Oct’s 3337 low, this recovery attempt may also be a tremendously opportunistic 2nd-Wave corrective rebuttal to Sep-Oct’s initial 1st-Wave decline within a peak/reversal count that could be massive in scope.
IF IF IF the current recovery is such a corrective 2nd-Wave, then somewhere between spot and last month’s 3763 high the market needs to arrest this rebound with a countering bearish divergence in short-term momentum after what appears to be a 3-wave corrective structure up from 3337. We will be keeping a very keen eye on this development in the days/week immediately ahead.
Stepping back, what may be at stake here is a major peak/reversal-threat environment stemming from the unique and compelling combination of:
- 20-Sep’s bearish divergence in daily momentum that broke Aug-Sep’s portion of the secular uptrend
- waning momentum on a WEEKLY scale (confirmed below 08-Aug’s 3266 larger-degree corrective low
- understandably historically extreme bullish sentiment/contrary opinion levels not seen it at least SEVEN YEARS
- Aug-Sep’s textbook 5-wave rally that nay be the completing 5th-Wave to
- a massive 5-wave Elliott sequence dating from Sep’22’s 2192 low, and…..
- the market’s close proximity to 2011’s 3775 all-time high on a monthly log scale basis below.
All these peak/reversal-threat factors have put this market in position to satisfy our three key reversal requirements of:
- a confirmed bearish divergence in momentum of a scale sufficient to at least threaten the major uptrend (debatable)
- proof of trendy, impulsive 5-wave behavior on the suspected initial counter-trend decline (satisfied)
- proof of 3-wave corrective behavior on the subsequent rebuttal to the initial counter-trend decline (what we’re watching for in the period immediately ahead).
In sum, today’s bullish divergence in short-term momentum above 3525 breaks Sep-Oct’s downtrend and exposes at least a 2nd-Wave corrective rebound within a major peak/reversal threat or a 5th-Wave resumption of the secular bull to new highs above 3763. Per such, shorter-term traders have been advised to neutralize recently recommended bearish exposure and move to a neutral-to-cautiously-bullish stance with a relapse below 3337 negating this call and resurrecting the major peak/reversal count. A bullish policy and exposure remain advised for longer-term commercial players with a relapse below 3337 required to pare exposure to more conservative levels and commensurately larger-degree weakness below 3266 to not only jettison remaining exposure, but also move to a new bearish policy. We will also be keeping a very keen eye on short-term upside momentum in the days/week immediately ahead, where a recovery stemming confirmed divergence from a level shy of 15-Sep’s 3763 high may present one of the great risk/reward selling opportunities across the entire commodities spectrum.