Posted on Jan 04, 2024, 10:45 by Dave Toth

Yesterday’s slip below 20-Dec’s 4743 smaller-degree corrective low and short-term bull risk parameter discussed in 28-Dec’s Technical Blog confirms a bearish divergence in short-term momentum.  This mo failure defines 28-Dec’s 4842 high as one of developing importance and the END of the uptrend from at least 07-Dec’s 4548 larger-degree corrective low.  Per such, last week’s 4842 high is considered our new short-term parameter from which shorter-term traders with tighter risk profiles can objectively base non-bullish decisions like long-covers and cautious bearish punts ahead of a suspected correction of Dec’s portion of the secular bull trend, the 38.2% and 50% retraces of which cut across at 4729 and 4695 (for what these “derived” levels are worth).

We will be watchful for a bounce-stemming bearish divergence in short-term mo from a level shy of 4842 for a preferred risk/reward selling opportunity for shorter-term traders.

On a broader scale, the daily log chart below shows the bearish divergence in daily momentum that, in fact, breaks the uptrend from 07-Dec’s 4548 larger-degree corrective low and key long-term bull risk parameter.  This chart also shows that by virtue of the extent and uninterrupted nature of mid-Dec’s explosive rally, today’s mo failure below 4743 exposes an area totally devoid of any technical levels of merit shy of key former resistance-turned-support around the 4635-to-4608-area.  While the extent of a correction or reversal lower at this juncture is indeterminable, this market could easily decline to the lower-4600-handle-area in the weeks ahead and remain well within well within the bounds of a mere correction within the secular bull market.  Such a setback, stemmed by a requisite bullish divergence in momentum, would present a favorable risk/reward buying opportunity for those who have under-participated in Oct-Dec’s resumption of the secular bull market.

To threaten the secular bull market, especially after establishing and thus far failing to sustain gains above Jan’22’s 4808 former al-time high, commensurately larger-degree weakness below 07-Dec’s 4548 larger-degree corrective low remains required.  This 4548 level remains intact as our key long-term bull risk parameter pertinent to longer-term institutional players and investors.  A failure below 4548 will, in fact, break Oct-Dec’s impressive, impulsive uptrend and, especially given what would be an egregious failure to sustain all-time highs above Jan’22’s 4808 previous all-time high, resurrect a peak/reversal count that could be major in scope.  But we can only cross that bridge if/when the market takes us there.  Well before such broader weakness below 4548, setback attempts in the weeks ahead advised to first be approached as CORRECTIVE BUYING opportunities by longer-term players, with the risk of such being a break below 4548.

In effect and as a result of yesterday’s bearish divergence in relatively short-term momentum, we have a situation where the short-term trend is down within the still-arguable and major bull trend, with the resulting key directional flexion points being 4842 and 4548.

Stepping back even further, the weekly chart below shows last week’s poke to a new all-time high, an achievement the market has thus far failed to sustain.  Amidst understandably historically frothy bullish sentiment/contrary opinion levels and the Fibonacci fact that the resumed rally from 27-Oct’s 4122 low came within a mere 20-pts of the (4822) 0.618 progression of Oct’22 – Jul’23’s preceding rally from 3502 to 4635, we don’t want to ignore the possibility of embryonic rumblings of a topping process that may be more protracted.  Nonetheless, we cannot conclude a larger-degree peak/reversal process from proof of only short-term weakness.  We can only conclude last week’s 4842 high as a reliable, market-defined high from which shorter-term non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed.  Needless to say, a recovery above 4842 will confirm any setback as a correction, reinstate the secular bull and expose indeterminable and potentially major gains thereafter.

These issues considered, shorter-term traders have been advised to move to a neutral/sideline position to circumvent the depths unknown of an interim correction lower that could have sights on the 4600-handle in the weeks ahead.  A recovery above 4842 will negate this call, reinstate the bull and warrant a return to a bullish policy.  A bullish policy and exposure remain advised for long-term institutional players and investors with commensurately larger-degree weakness below 4548 required to negate this call, warrant neutralizing any/all bullish exposure ahead of a correction or reversal of potentially major scope.

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