This morning’s failure below 14-Feb’s 14.50 initial counter-trend low confirms a bearish divergence in momentum that defines 19-Feb’s 15.20 high as the latest smaller-degree corrective high this market is now required to recover above to arrest the intermediate-term downtrend, render the sell-off attempt from 12-Feb’s 15.29 high a 3-wave and thus corrective affair and reinstate the major bull trend. In this regard, this 15.20 level serves as our new short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.
This divergence in admittedly short-term momentum is of a scale that only allows us to conclude the end of the uptrend from 28-Jan’s 13.98 next larger-degree corrective low. Indeed, this 13.98 low remains intact as our key longer-term risk parameter the market remains required to break to confirm a bearish divergence in momentum of a SCALE SUFFICIENT to threaten the longer-term uptrend.
HOWEVER….there are certainly some ancillary factors that warn us to beware of exactly such a broader peak/reversal threat, like the prospect that 12-Feb’s 15.29 high COMPLETED a 5-wave Elliott sequence up from 12Sep19’s 11.89 low.
It’s also notable and contributing to a peak/reversal-threat case that our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC has reached a near THREE YEAR high of 73%. Also shown in the weekly log active-continuation chart above is the Fibonacci fact that the rally from Sep’19’s 10.68 low has spanned a similar length (i.e. 1.000 progression) to 2018’s preceding 9.91 – 14.24 rally. This 1.000 progression projects to 15.35. The weekly active-continuation chart’s 12-Feb high of 15.90 was basis the Mar contract. The contract roll took place on Fri 14-Feb. 12-Feb’s high basis the now-prompt May contract is 15.20, a mere 15 ticks away from that Fib progression.
Perhaps it will also prove notable that, on a monthly log active-continuation basis below, the entire 18-month recovery attempt has also reached its 38.2% retrace of 2016-18’s 24.10 – 9.91 decline at 15.45.
These issues considered, we acknowledge that commensurately larger-degree weakness below 28-Jan’s 13.98 larger-degree corrective low and key risk parameter remains required to confirm a bearish divergence in momentum of a sufficient scale to expose a peak/reversal environment that could be major in scope. And while longer-term player are OK to pare bullish exposure to more conservative levels as a result of today’s bearish divergence in short-term mo, further weakness below 13.98 remains required to jettison the position altogether and move to a new bearish policy. Shorter-term traders have been advised to neutralize exposure on today’s failure below 14.50 and are further advised to establish a cautious bearish policy at-the-market (14.45 OB) with a recovery above 15.20 required to negate this call and warrant its cover. Until and unless such 15.20+ strength is proven, further and possibly protracted losses should not surprise.