Posted on Apr 27, 2023, 07:28 by Dave Toth
Yesterday’s recovery above our mini and short-term bear risk parameters at 88.77 and 89.90 discussed in 20-Apr’s Technical Webcast confirms a bullish divergence in short-term momentum detailed in the hourly chart below. This momentum failure defines 21-Apr’s 84.62 low as one of obvious developing importance and our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively base non-bearish decisions like short-covers and cautious bullish punts.
Given the magnitude of the major bear trend however, this short-term mo failure is of an insufficient SCALE to conclude anything more than another interim corrective hiccup at this juncture. To confirm a momentum failure of a scale sufficient to expose a major reversal higher, commensurately larger-degree strength above 27-Mar’s 94.70 larger-degree corrective high and key long-term bear risk parameter remains required. This distinction raises the not uncommon matter of technical and trading SCALE and navigating the correction-vs-reversal debate. On a short-term basis the trend is obviously up. On a long-term basis the major downtrend remains intact. Traders are advised to navigate this distinction within the bounds of their personal risk profiles as larger-degree strength above 94.70 remains required for longer-term commercial players to neutralize a still-advised bearish policy.
Drilling down even further, yesterday’s rally from yesterday’s 86.17 low is either the completing C-Wave of a bear market correction or the 3rd-Wave of a broader base/reversal count. A relapse below 86.17 would negate the impulsive integrity of the latter bullish count and render the recovery from 84.62 the 3-wave and thus corrective structure we suspect it is. In this regard, 86.17 may be considered a mini bull risk parameter pertinent to short-term traders.
On a broader scale, the daily (above) and weekly (below) log scale charts show the magnitude of the major bear trend. Yesterday’s recovery above 89.90 is only of a scale that allows us to conclude the end of the portion of the major bear trend from 27-Mar’s 94.70, NOT the broader (suspected 3rd-Wave) decline from 21-Feb’s 106.00 high. To break Feb-Apr’s downtrend, the market must, in fact, recoup 27-Mar’s 94.70 larger-degree corrective high, which also happens to be the exact 50% retrace of Feb-Apr’s 106.00 – 84.62 decline.
If the current recovery is a larger-degree (4th-Wave) correction, we would expect a recovery-stemming bearish divergence in short-term momentum somewhere between spot and 94.70, and perhaps around the (92.23) 38.2% retrace of Feb-Apr’s suspected 3rd-Wave decline. Time and price action will tell.
From an even longer-term perspective, the monthly log active-continuation chart below shows the market still in the middle-half bowels of its massive but lateral historical range where the odds of aimless whipsaw risk are approached as higher. This perspective also shows how easily the Jun contract could still descend to the middle of this middle-half range around 75-cents.
In sum, the short-term trend is up within the still-arguable long-term downtrend with the key directional flexion points at 86.17, 84.62 and 94.70. Traders are advised to base directional biases and exposure around these levels commensurate with their personal risk profiles. We will be watchful for a recovery-countering bearish divergence in short-term momentum in the week or so ahead that would flip the script back to the bear side for shorter-term traders.