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S&P Reaffirms Intra-Range Peak/Reversal Count

Posted 10/02/2019 7:40AM CT | RJO Market Insights

Overnight’s clear, impulsive break below the 2940-area we’ve discussed as a key former resistance-turned-support condition reaffirms our intra-range peak/reversal count introduced in 25-Sep’s Technical Blog following that day’s bearish divergence in short-term momentum below 2957.  This continued weakness leaves 26-Sep’s 2995 high in its wake as the latest smaller-degree corrective high the market now needs to sustain losses below to maintain a more immediate bearish count.  Its failure to do so will render the sell-off attempt from 13-Sep’s 3026 high a 3-wave and thus corrective affair consistent with a broader bullish count.  Per such, this 2995 level becomes our new short-term risk parameter from which non-bullish decisions like long-covers and bearish punts can be objectively rebased and managed.  In lieu of such 2995+ strength at least the intermediate-term trend remains clearly down and should not surprise by its continuance or acceleration.

From a broader perspective, the daily chart above shows this market’s total rejection of the extreme upper recesses of the past couple months’ range and failure below key former 2940-area resistance-turned-support that leaves the market vulnerable to a return to the lower recesses of this range or possibly even a major reversal lower.  Commensurately larger-degree weakness below 26-Aug’s 2810 larger-degree corrective low and key risk parameter remains minimally required to threaten the secular bull trend however.

Oddly, the weekly log chart below shows sentiment/contrary opinion levels still near historical LOWS DESPITE the market’s recent residence near all-time highs.  Indeed, recent and current pessimistic levels are typical of the ENDS of steep corrections after the market’s gotten its brains bashed in, not so close to all-time highs.  The market typically doesn’t reward the consensus so early in a prospective move, so we’ll be watchful for a relapse-stemming bullish divergence in short-term mo needed to flip the script back to the bull side that might then see the market vulnerable to higher prices.  In lieu of such a bullish divergence in mo, at least the intermediate-term trend remains clearly down and should not surprise by its continuance or acceleration until and unless negated by a recovery above 2995.

These issues considered, a cautious bearish policy remains advised for shorter-term traders with a recovery above 2995 required to negate this call, resurrect the broader bull and warrant a return to the buy side.  Long-term players remain advised to maintain a cautious bullish policy with a failure below 2810 required to negate this call and warrant its cover ahead of a larger-degree correction or reversal lower.

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