Posted on Oct 09, 2023, 08:15 by Dave Toth

Overnight’s recovery above a minor corrective high from Thur at 84.92 and our short-term risk parameter discussed in Fri’s Technical Webcast confirms a bullish divergence in short-term momentum that defines Fri’s 81.50 intra-day low as one of developing importance and our new short-term parameter from which non-bearish decisions like short-covers can be objectively based and managed.  IF the past week-and-a-half’s 14% pullback from 95.03 to 81.50 is just a correction within this year’s major recovery, the market would/should be expected to hold above 81.50.  Its failure to do so will obviously reinstate the developing downtrend and, for longer-term reasons we’ve recently discussed, resurrect a broader peak/reversal count and expose potentially protracted losses thereafter.

On a broader daily scale, we’ve recently discussed the prospect that the entire rally from 12-Jun’s 66.80 intra-day low and 67.34 close is a complete and considerable 5-wave Elliott sequence as labeled in the log high-low chart above and log close-only chart below.  To negate this count and reinstate the broader uptrend, this market needs to recoup 28-Sep’s 95.03 high and/or close above 27-Sep’s 93.71 high close.  In effect, we have a situation where the short-term trend is up within a still-arguable longer-term developing downtrend.

Per a prospective bullish count however, it is interesting to point out that Thur’s 82.56 low close was just 4-cents away from the (82.60) 38.2% retrace of Jun-Sep’s entire 67.34 – 93.71 rally on a log scale close-only basis below.  Can we CONCLUDE a resumed bullish count just because of this combination of a bullish divergence in short-term mo from such a Fib retrace?  Of course not.  But we CAN conclude last week’s low (82.56 on a closing basis and 81.50 on an intra-day basis) as THE level(s) this market must now hold per any such alternate bullish count, so the risk parameter of any non-bearish decisions is specific and objective at these levels.

Longer-term traders are reminded of the broader peak/reversal-threat elements of:

  • thus far only a 3-wave (and prospective corrective) recovery from 20-Mar’s 64.36 low that
  • stalled around the (94.02) 50% retrace of Jun’22 – Mar’23’s 123.68 – 64.36 major decline amidst
  • historically frothy sentiment/contrary opinion levels.

To negate a broader peak/reversal count and resumption of last year’s major downtrend, this market simply needs to recoup 28-Sep’s 95.03 intra-day high.  IF today’s recovery is part of a mere correction within a broader bearish count, we would expect to see labored, 3-wave corrective behavior on this recovery attempt arrested by a countering bearish divergence in short-term mo from a level south of 95.03.  What the market has in store for us between 81.50 and 95.03 is anyone’s guess at this juncture, which, once again, introduces the critical technical and trading matter of SCALE and personal risk profile in the equation.  Shorter-term traders are within their tighter risk profiles warranting the move from a bearish to a neutral stance.  For longer-term commercial players, commensurately larger-degree strength above 95.03 remains required to negate a longer-term bearish count and exposure. This said, longer-term players have the option of paring or neutralizing bearish exposure as a result of today’s bullish divergence in SHORT-TERM momentum, but this acknowledges and accepts whipsaw risk below 81.50 in exchange for steeper nominal risk above 95.03.

Finally and on an even broader scale, the monthly log chart below shows tis market deep, deep within the middle-half bowels of its massive but lateral historical range where the odds of aimless whipsaw risk are still approached as high, warranting a more conservative approach to directional risk assumption.

These issues considered, shorter-term traders have been advised to move to a neutral/sideline position in order to circumvent the heights unknown of a suspected corrective rebound within a broader peak/reversal environment.  A relapse below 81.50 is required to negate this count, resurrect the reversal lower and warrant a return to a bearish stance.  A bearish policy remains advised for longer-term commercial players with a recovery above 95.03 required to negate this call and warrant its cover.

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