Posted on Feb 05, 2024, 09:13 by Dave Toth

The market’s failure this morning below 29-Jan’s 82.60 smaller-degree corrective low and our short-term but key risk parameter discussed in 30-Jan’s Technical Blog confirms a bearish divergence in short-term momentum.  This mo failure defines 30-Jan’s 85.92 high as one of developing importance, the end of at least the uptrend from 17-Jan’s 76.72 and very possibly the end of a 3-wave and thus corrective event from 02-Jan’s 71.70 low that, if correct, warns of a resumption of the secular bear market from Mar’22’s 127.32 high.  Per such, we’re defining 85.92 as our short-term parameter from which both short- and longer-term traders are advised to base non-bullish decisions like long-covers and cautious bearish punts.

Stepping back to a daily perspective, both the log scale bar chart above and close-only chart below show Jan’s recovery attempt to be only a 3-wave structure to this point.  Left unaltered by a recovery above last week’s high(s), this 3-wave recovery may be considered a correction within the secular bear market that would warn of a resumption of that bear to eventual new lows below 02-Jan’s 71.70 low.  The fact that the resumed rally from 16- or 17-Jan’s corrective low(s) is virtually identical in length (i.e. 1.000 progression) to early-Jan’s initial rally would seem to reinforce this bear market correction count.

If this bearish count is wrong and a broader 5-wave sequence up is still intact, the market must arrest the current (prospective 4th-Wave) relapse at a level above 11-Jan’s 79.42 (prospective 1st-Wave) high.  A break below 79.42 would jeopardize the impulsive integrity of such a bullish count, confirm Jan’s recovery as a 3-wave and thus corrective affair and reinforce the broader bearish count.  Per such, that 79.42 level remains intact as a bull risk parameter for longer-term commercial players who may want to fade this relapse.

Moving back still further, we’ve discussed the market’s position deep, deep within the middle-half bowels of its massive but lateral historical range for months now and the greater odds of aimless whipsaw risk typical of such range-center environs.  Against the backdrop of the secular bear trend down from Mar’22’s 127.32 high, it’s not hard to envision Jan’s spasm as another such whipsaw ahead of an eventual resumption of the major bear.  By virtue of today’s bearish divergence in admittedly very short-term momentum, we believe the market has rejected/defined a specific high at 85.92 from which traders can objectively bet on a resumption of the major bear.

These issues considered, traders have been advised to neutralize any/all bullish exposure and are further advised to return to a cautious bearish stance ahead of losses that could be protracted.  A recovery above 85.92 is required to negate this call, warrant its cover and possibly consider a cautious bullish stance.

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