Posted on Apr 24, 2023, 07:40 by Dave Toth

In 19-Apr’s Technical Webcast we discussed 14-Apr’s 190.80 smaller-degree corrective low as the new level the market needed to sustain gains above in order to maintain a more immediate bullish count after breaking 22-Feb’s 194.15 high and posting the highest prices in six months.  The 240-min chart below shows the market’s failure below this level that confirms a bearish divergence in short-term momentum and defines 18-Apr’s 204.90 high as the end of the uptrend from 31-Mar’s 166.15 larger-degree corrective low.  Per such, we’re defining 204.90 as our new short-term risk parameter from which traders can objectively base non-bullish decisions like long-covers and cautious bearish punts.

Stepping back a bit, we cannot conclude a larger-degree peak/correction/reversal from proof of only short-term weakness like Fri’s slip below 190.80.  Indeed, commensurately larger-degree weakness below 31-Mar’s 166.15 larger-degree corrective low remains required to, in fact, break the uptrend that dates from 11-Jan’s 142.05 low.  However:

  • last week’s 204.90 high was only about a penny-and-a-half away from the (206.61) 61.8% retrace of Feb’22 – Jan’23’s entire 260.45 – 142.05 decline on a weekly log scale basis below
  • Fri’s update in our RJJO Bullish Sentiment Index to an 81% level shows the understandable degree to which the managed money community has flocked to the bull side
  • there’s a ton of green between spot and 31-Mar’s 166.15 larger-degree corrective low and key long-term bull risk level
  • given the extent 2022 – 23’s decline, this year’s recovery falls within the bounds of a correction, and……
  • on an even broader monthly log basis, this market remains deep within the middle-half bowels of its massive but lateral historical range where the odds of aimless whipsaw risk remain high.

It is perhaps this final technical fact that presents the greatest challenges heading forward, where the market’s gross failure to sustain an intra-historical-range trend should not come as a surprise due to the greater odds of aimless whipsaw risk typical of such range-center conditions.  And with no levels of any technical pertinence below the market shy of 310-Mar’s 166.15 low, we believe it’s wise for even longer-term commercial players to at least pare bullish exposure to more conservative levels or neutralize exposure altogether, acknowledging and accepting whipsaw risk above 204.90 in exchange for much steeper nominal risk below 166.15.

These issues considered, traders are advised to move to a neutral/sideline position to remove the risk/cost of a bigger correction or reversal lower with a recovery above 204.90 required to negate this call and warrant returning to a cautious bullish stance.  In lieu of such 204.90+ strength, further lateral-to-lower, and possibly much lower levels are anticipated.

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