Posted on Oct 03, 2022, 08:31 by Dave Toth
Fri’s break below 08-Sep’s 13.73 larger-degree corrective low and key risk parameter reinforces our peak/reversal count discussed in 23-Sep’s Technical Webcast and confirms 13-Sep’s 14.94 high as a key market-defined high that this market is now required to recoup to negate a bearish count that could have long-term implications. Per such, 14.94 becomes our new long-term parameter from which longer-term commercial players can objectively base non-bullish decisions like long-covers and new bearish exposure.
On a shorter-term basis, Fri’s continued slide below last Wed’s 13.91 low leaves Fri’s 14.26 high in its wake as the latest smaller-degree corrective high and minimum level this market now must recoup to break the smaller downtrend from 14.94 and expose at least a corrective pop to this portion of the broader bear and perhaps resurrect a broader bullish count. In this regard, 14.26 serves as our new short-term bear risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of bearish exposure recommended from the 14.26-area.
From a longer-term perspective, the significance of Fri’s failure below 08-Sep’s 13.73 larger-degree corrective low is that it confirms a bearish divergence in WEEKLY momentum and breaks Jul-Sep’s entire recovery attempt from 12.88 to 15.09 (14.94 basis Globex day-session prices). The fact that this major momentum failure stems from the upper-quarter of this year’s range remains consistent with our major peak/reversal count that contends that 09-Jun’s 15.85 high completed a massive 5-wave Elliott sequence from 2019’s 7.91 low and is the start of a major, multi-quarter or multi-year reversal lower. The extent and 5-wave impulsiveness of Jun-Jul’s 15.85 – 13.02 decline constitutes the initial 1st-Wave down of this major reversal, with Jul-Sep’s extraordinarily labored 3-wave recovery considered an extensive and not unexpected 2nd-Wave correction within tis major peak/reversal PROCESS that, if correct, now exposes the dramatic 3rd-Wave down of the reversal that would be expected to blow away 22-Jul’s 12.88 low.
A threat to or deferral of this bearish count stems from the fact that this market remains within the middle-half bowels of this year’s range where the odds of aimless whipsaw risk are still approached as high, warranting a more conservative approach to risk assumption. And herein lies the rationale and importance of a tight but objective risk parameter like Fri’s 14.26 smaller-degree corrective high. Until and unless this market recovers above at least 14.26 however and preferably 14.94, further and possibly accelerated losses should not surprise.
Finally, the monthly log active-continuation chart below shows the past few months’ peak/reversal-threat behavior amidst still-historically-frothy levels in our RJO Bullish Sentiment Index of Managed Money long exposure typical of such major peak/reversal behavior like that stemming from 2012’s 17.89 high. “Extensive” (2nd-wave) corrective rebounds like this past Jul-Sep are typical of such major peak/reversal processes. And now that the market has rejected/defined a larger-degree corrective high like 14.94, we have a very objective level from which to base the risk of a new bearish policy and exposure that could have long-term repercussions.
These issues considered, a bearish policy and exposure remain advised with a recovery above 14.26 required for short-=term traders to pare or neutralize exposure and commensurately larger-degree strength above 14.94 for longer-term commercial players to follow suit. In lieu of such strength, further and possibly steep, sustained losses straight away should not surprise.