While the potential for a bearish divergence in short-term momentum is easy to see in the 240-min chart above and will be CONFIRMED on a failure below Tue’s very minor corrective low at 4052, the exciting (from a bullish perspective) thing about the extent and impulsiveness of early-Apr’s rally is that it SEPARATES the market from about a month-and-a-half of clustered, non-trending price action between roughly 3960 and 3720 that we believe now serves as a new “base” from which to gauge the secular bull’s continuation. There is no question at all that the trend is up on all scales and should not surprise by its continuance or acceleration. But to maintain the risk/reward merits of a continued bullish policy “up here”, it is imperative that the market continue to BEHAVE LIKE A BULL by sustaining trendy, impulsive behavior higher, exactly like it has done in early-Apr.
Now-former resistance from the 3960-to-3980-area should be fully expected to hold as new near-term support ahead of further trendy, impulsive and increasingly obvious upside price action. A failure below Tue’s 4052 low will confirm a bearish divergence in momentum, but against the backdrop of the secular bull trend such a minute mo failure would be a grossly insufficient scale to expose anything more than a very minor corrective dip perhaps only pertinent to scalpers. MINIMALLY, we believe a failure below at least 30-Mar’s 3933 corrective low is required to threaten the secular bull enough to garner everyone’s attention. And still-further weakness below 25-Mar’s 3843 larger-degree corrective low and new key long-term risk parameter would warrant even longer-term institutional players and investors to take cover. Until and unless this market fails below at least 3933, a full and aggressive bullish policy and exposure remain advised.
The magnitude of the secular bull trend is obvious in the weekly log chart below, as is the understandably historically frothy bullish sentiment/contrary opinion levels that have warned of and accompanied major PEAK/reversal environments in the past. But we would remind traders that sentiment/contrary opinion is not an applicable technical tool in the absence of an accompanying confirmed bearish divergence in momentum needed to, in fact, threaten or break the major uptrend. Herein lies the importance of specific and objective corrective lows and risk parameters like 3933 and especially 3843. Until and unless such weakness is proven, frothy sentiment levels mean nothing. They will not inhibit further and possibly spectacular gains for an extended period of time.
These issues considered, a full and aggressive bullish policy and exposure remain advised with a failure below at least 3933 required for shorter-term traders to move to the sidelines and commensurately larger-degree weakness below 3843 for longer-term institutional players and investors to follow suit. In lieu of such weakness, further and possibly accelerated gains remain expected straight away.