The market’s failure the past couple days below a very minor corrective low at 4383 from 14-Jun confirms a bearish divergence in momentum. This mo failure defines 16-Jun’s 4494 high as one of developing importance. But against the backdrop of even the past month’s continued recovery, let alone the broader 8-month recovery from last Oct’s 3502 low, this momentum failure is of too small a scale to approach as anything other than another interim correction at this juncture. Nonetheless, 16-Jun’s 4494 high is considered a mini parameter from which shorter-term traders can objectively base the risk of non-bullish decisions like long-covers and cautious bearish punts.
On the next larger scale, the 240-min chart above and daily chart below still show 08-Jun’s 4262 corrective low as the level this market is required to fail below to conclude the end of the portion of the broader recovery from 24-May’s 4114 major corrective low. Per such, this 4262 level remains intact as our short-term bull risk parameter.
On a broader scale, we believe 24-May’s 4114 corrective low is arguably this market’s single most important technical level. Whatever the market may have in store for us to the bull side, such a count would NOT remain intact if this market failed below 4114, which would also be below a ton of former resistance-turned-support around the 4225-to-4190-area. Such weakness would jeopardize the trendy, impulsive integrity of a broader bullish count and resurrect odds that the 8-month recovery from last year’s 3502 low is a 3-wave correction ahead of what would/could be surprising losses thereafter, including a resumption of 2022’s secular bear trend.
In effect, we have a technical situation where the very, very short-term trend is down within the still-arguable broader uptrend. Technical and trading SCALE commensurate with one’s personal risk profile is a key determinate of directional exposure.
Finally, the weekly chart below shows the 8-month recovery from last Oct’s 3502 low relative to last year’s major plunge from 4808 to 3502. While this recovery is encouraging and is starting to reflect trader/investor confidence evidenced by the highest sentiment/contrary opinion levels in months, we have to keep one eye on the prospect that this recovery is just a correction within a major topping process until/unless negated by a recovery above Jan’22’s 4808 all-time high.
If the secular bull trend is resuming, then we would expect the bull to BEHAVE LIKE ONE by sustaining trendy, impulsive behavior higher. A relapse below 24-May’s 4114 low would threaten a broader bullish count while commensurately larger-degree weakness below 13-Mar’s 3839 low would negate it, render the recovery from last Oct’s 3502 low a 3-wave and thus corrective structure and re-expose 2022’s downtrend that preceded it. Long-term bulls should take comfort in knowing that levels like 4114 and 3839 exist as pivotal bull risk parameters to protect long exposure against another major collapse like last year. Such a resumed bear market WILL NOT “sneak up” on anyone, but rather be well announced by relapses below these levels. Until and unless this market weakens below at least 08-Juns 4262 corrective low and preferably below 4114, the longer-term trend remains up and should not surprise by its continuance.
These issues considered, a bullish policy remains advised with a failure below at least 4262 required for traders and even investors to pare or neutralize exposure. For very short-term traders however, the past couple day’s momentum failure warrants a move to a least a neutral/sideline position until negated by a recovery above 4494 needed to nullify this divergence and reinstate the bull.