Following Mon’s bearish divergence in very short-term momentum below 13-Jul’s 62.95 minor corrective low discussed in Fri’s Technical Webcast and yesterday’s thus far failed recovery attempt, we believe the market has identified last week’s 65.64 high as one of developing importance and a very short-term but objective risk parameter for an acute risk/reward selling opportunity. We acknowledge that commensurately larger-degree weakness below 07-Jul’s 58.03 corrective low and short-term risk parameter remains required to break the past month’s recovery attempt and confirm it as a 3-wave and thus corrective event within a broader peak/reversal process. But we believe ancillary peak/reversal-threat evidence detailed below warrants a punt from the bear side from current 63.30-area levels with a recovery above 65.64 required to negate this specific call and warrant its cover.
The list of peak/reversal-threat elements is a compelling one that includes:
- the market’s close proximity to the extreme upper recesses of the past couple months’ range in the dec contract (above)
- mid-Jun’s bearish divergence in momentum on both a Dec-contract and active-continuation (below) basis
- only a 3-wave and thus (B-or 2nd-Wave) corrective recovery from 18-Jun’s lows that has stalled in the immediate area of the (66.15) 61.8% retrace of Jun’s 73.74 – 55.49 decline on a daily log active-continuation basis
- Mon’s “outside day” (higher high, lower low and lower close than Fri’s range and close)
- historically frothy sentiment/contrary opinion levels
- upside momentum that has arguably been waning for months
- the market’s proximity to and rejection thus far of the area around 2008’s former all-time high at 72.69
- an arguably complete and massive 5-wave Elliott sequence up from Apr’20’s low.
This is an extensive and compelling list of technical facts and observations that, at the very least, question the longer-term risk/reward merits of a bullish policy. We acknowledge that, as a result of Jul’s continuation of the second-half of Jun’s rebound, the market as yet to satisfy the third of our three key reversal requirements of proof of 3-wave corrective behavior on a recovery attempt following 1) a confirmed bearish divergence in momentum and 2) proof of trendy, impulsive behavior on the initial counter-trend decline. Again, a relapse below 07-Jul’s 58.03 smaller-degree corrective low and short-term risk parameter remains required to satisfy this third reversal requirement. But given this list of peak/reversal elements and, perhaps most importantly, Mon’s definition of a 65.64 high that can be used as a very tight but objective risk parameter, traders are advised to establish bearish exposure at-the-market (63.30 OB) with a recovery above 65.64 required to negate this specific al and warrant its cover. In lieu of such 65.64+ strength, if this peak/reversal count is correct, downside potential below Jun’s 51.98 low would be expected. Needless to say, a recovery above 08-Jun’s 67.06 high in the Dec contract remains required to reinstate the secular bull in this contract. But this would still leave the market well below Jun’s 73.74 high on a continuation basis that could easily maintain a broader peak/reversal-threat environment.