In Fri’s Technical Blog following that day’s mini momentum failure below 4474, we discussed the need for the market to hold at suspected support from the 4446-to-4412-area that previously provided resistance in order for the (suspected corrective) recovery from 24-Jan’s 4212 low to continue. While 02-Feb’s 4586 high and resistance and mini risk parameter remains intact, the 240-min chart below shows a countering bullish divergence in very short-term momentum that defines Fri’s 4438 low as one of developing importance, right in that area of suspected support. We believe this raises the odds of a resumption of the past couple weeks’ recovery attempt to new highs above 4586.
A relapse below Fri’s 4438 low would arguably negate this call, but we’re maintaining our short-term bull risk parameter at 31-Jan’s 4395 corrective low nonetheless as that would be a clear break of that 4446-to-4412-area support needed to reinforce a broader bear market correction count and re-expose a broader reversal lower.
The daily log chart above shows the market’s approximate 61.8% retracement thus far of Jan’s 12% swoon from 4808 to 4212. As detailed above however, overnight’s recovery reinforces a count calling for further gains above last week’s 4586 high, and once above that threshold, there are NO levels of any technical merit shy of 04-Jan’s 4808 all-time high. This doesn’t mean we’re forecasting a move to 4808, but it does mean that only a bearish divergence in momentum will arrest the rally. If the market breaks 4586, we will trail our short-term risk parameter to Fri’s 4438 low, a corrective low the market would then be required to sustain gains above to maintain a more immediate bullish count. Such a specific requirement will be important relative to a major peak/reversal threat initiated by the extent of Jan’s meltdown below 01-Oct’s 4260 low that confirmed a bearish divergence in WEEKLY momentum that arguably broke the secular bull trend from Mar’20’s 2174 low. This major mo failure defines 04-Jan’s 4808 high as THE obvious level this market needs to recoup to mitigate a major peak/reversal environment, confirm Jan’s break as a correction and reinstate the secular bull market. Until and unless such commensurately larger-degree strength is proven, it would be premature to conclude that this current recovery is not a correction within that peak/reversal process and an eventual selling opportunity with fantastic risk/reward merits.
These issues considered, traders are advised to neutralize and cautious bearish exposure at-the-market and move to a cautious bullish stance with a failure below 4438 negating this specific call and warranting its immediate cover. In lieu of such weakness, further gains are anticipated with a break above 4586 exposing accelerated gains where and when our attention will shift to momentum.