Posted on Mar 15, 2023, 11:18 by Dave Toth
Today’s recovery above yesterday’s 96.515 high nullifies yesterday’s bearish divergence in short-term momentum discussed in yesterday’s Technical Blog and reinstates the uptrend from 08-Mar’s 94.775 low. The 240-min chart below shows that this resumed rally leaves yesterday’s 95.755 low in its wake as the latest smaller-degree corrective low in its wake as the latest smaller-degree corrective low this market is now required to fail below to break this uptrend and expose at least a correction of the broader recovery from 94.775. Per such, this 95.755 low is considered our new short-term risk parameter from which traders can base non-bearish decisions like short-covers and cautious bullish punts, although we believe that ”chasing” bullish exposure “up here” on this suspected initial recovery presents poor risk/reward merits.
On a broader scale, the extent and impulsiveness of the past week’s IS SUFFICIENT to conclude the END of the major bear market and massive 5-wave Elliott sequence down from Aug’20’s 99.965 high as a result of this week’s bullish divergence in WEEKLY and MONTHLY momentum. Recent lows in the Bullish Consensus (marketvane.net) that haven’t been seen since 2006 contribute to this base/reversal count. HOWEVER, the bullish divergence in momentum and impulsive 5-wave rally only satisfy the first two of our three key reversal requirements. The critical third requirement- proof of 3-wave corrective behavior on a subsequent relapse attempt- remains to be satisfied.
The forces that have driven the market smashingly lower for 31 MONTHS are unlikely to simply evaporate over a miniscule period of time like the past week despite the obviousness and extent of the past week’s impressive rally. Rather and after a countering bearish divergence in momentum arrests the clear and present current uptrend, we would expect a (B- or 2nd-Wave) corrective rebuttal to this rally that could be extensive in terms of both price and time. For the time being however, this uptrend has resumed and should not surprise by its continuance or acceleration.
Capping off these base/reversal elements is an “outside MONTH up” shown in the monthly chart below. These technical facts produce one overriding result: 08-Mar’s 94.775 low as THE low and key bull risk parameter the market has to break to mitigate this long-term bullish count. Until and unless such weakness is proven, relapse attempts are advised to first be approached as corrective buying opportunities. But before even getting to that point, the current and suspected initial uptrend has resumed and should be expected to continue. Per such, a neutral/sideline policy is advised for the time being as we believe the risk/reward merits of chasing bullish exposure “up here” are poor. We will be watchful for a countering bearish divergence in momentum to stem this rally in the week or two ahead and prepare for a corrective relapse that we suspect will be extensive in scope.