Overnight’s failure below a minor corrective low of 14.205 from last Wed confirms a bearish divergence in short-term momentum detailed in the 240-min chart below. This mo failure defines Thur’s 14.98 high as the end of the recovery from 18-Mar’s 11.64 low and start of at least a correction of this rally and possibly a resumption of the secular bear trend that preceded it. Per such and despite the short-term nature of this momentum divergence, we’re defining this 14.98 high as our new LONG-TERM risk parameter to a bearish policy.
On a broader scale and given Mar’s resumption of the secular bear trend that dates from 2011’s 49.82 all-time high, it’s not hard to consider the recent rebound, as sharp as it was, as a mere (4th-Wave) correction within the secular bear trend to eventual new lows below 18-Mar’s 11.64 low. But a couple things bother us about this continued long-term bearish count.
First, the daily log scale chart below shows an almost exact 61.8% retrace of the decline from 09-Mar’s 17.615 high to 18-Mar’s 11.64 low. Such more “extensive” 61.8% retraces are typically seen in 2nd-waves, not 4th-waves. This doesn’t mean it never happens, only that it’s odd.
Secondly, last week’s rally is arguably a trendy, impulsive move as detailed in the 240-min chart above. Such impulsive behavior is typically either the start of a more protracted correction OR the start of a reversal the other way.
Thirdly, the decline from 24-Feb’s 18.92 high to 18-Mar’s 11.64 low is a complete 5-wave affair as labeled below. This is important because…..
…Lastly, that late-Feb’s high on a weekly log close-only basis below- as opposed to 04Sep19’s 19.75 intra-week high- arguably completed the 5-wave C-Wave up from Nov’18’s 14.14 low weekly close. This last point means that the 5th-Wave resumption of the secular bear trend may have begun from the Feb’20 high. And since we’ve concluded that that decline completed a 5-wave sequence on a daily basis above, we cannot ignore the possibility that 18-Mar’s 11.64 low just completed the secular bear market from Apr 2011’s 49.82 all-time high.
IF the recent recovery is part of a broader base/reversal environment or even a larger-degree correction higher, then by definition, any relapse from last week’s high would be expected to unfold in a labored, corrective, 3-wave MANNER and bottom at some level higher than 11.64. We will be watchful for a relapse-stemming bullish divergence in momentum after a more “extensive” 61.8% retrace of the recent 11.64 – 14.98 pop around the 12.916 level to raise the odds of this base/reversal prospect and what could be a very unique risk/reward opportunity from the bull side.
In the meantime and until negated by a recovery above 14.98, we anticipate at least a steeper correction lower and possibly a resumption of the secular bear trend to new lows below 11.64. Per such, traders are advised to rebase and manage a cautious bearish policy from current 14.25-area prices OB with a recovery above 14.98 negating this call and reinforcing a base/reversal count that could be major in scope.
