Posted on Jan 23, 2023, 08:37 by Dave Toth

In 05-Jan’s Technical Webcast we introduced the developing prospect for a more protracted correction or reversal of Sep-Jan’s impressive, impulsive $7.375, 42% rally following a bearish divergence in admittedly short-term momentum below 23.705.  With this morning’s break below 05-Jan’s 23.26 initial counter-trend low, the market has now confirmed a bearish divergence in WEEKLY momentum that exposes a larger-degree correction or reversal lower of indeterminable and potentially protracted scope that even longer-term commercial bulls should want to avoid.

As a direct result of this next larger-degree level of weakness, the 240-min chart below shows that the market has identified today’s 24.295 high as the latest smaller-degree corrective high it is now minimally required to recoup to render the sell-off attempt from 03-Jan’s 24.775 high a 3-wave and thus corrective affair that would re-expose Sep-Jan’s broader bull.  Per such, this 24.295 level serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of an interim bearish policy and exposure.  The importance of 03-Jan’s 24.775 high goes without saying as our new long-term risk parameter from which longer-term commercial players can objectively base non-bullish decisions like long-covers and bearish punts.

As introduced in early-Jan, the list pf peak/reversal-threat factors is a lengthy and compelling one that includes:

  • confirmed bearish divergences in both daily and weekly momentum
  • an “outside WEEK down” the week of 03-Jan’s 24.775 high
  • historically frothy levels in our RJO Bullish Sentiment Index
  • an arguably complete 5-wave Elliott sequence from 01-Sep’s 17.40 low (as labeled above), that
  • stopped within $0.20-cents of the (24.54) 61.8% retrace of 2021 – 2022’s entire 3035 – 17.40 decline.

From an even longer-term perspective, because the entire 2021 – 2022 sell-off attempt looks to be a 3-wave and thus corrective affair, and given the extent and impulsiveness of Sep-Jan’s rally, it is quite possible that Sep-Jan’s rally is the start of the resumption of the secular bull market that dates from Mar’20’s 11.64 low ahead of a resumption of the long-term bull to not only levels above 30.35, but possibly towards 2011’s 49.82 all-time high.  A TON of price action has to unfold in the quarters ahead before we can get off on that tangent, but we mention such a longer-term bullish prospect because as toppy as the technical facts listed above describes this market, even a $2- or $3-dollar setback in the months ahead could well prove to be a monumental BUYING opportunity.  For the time being however and until this market can recoup at least today’s 24.295 high, traders are advised to anticipate lateral-to-lower, and possibly considerably lower prices in the weeks and even months ahead.

These issues considered, a cautiously bearish policy is advised with a recovery above 24.295 required for shorter-term traders to move to the sidelines and commensurately larger-degree strength above 24.775 required for longer-term commercial players to follow suit.  In lieu of such strength, further and possibly protracted losses should not surprise.

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