Posted on Jan 22, 2024, 08:05 by Dave Toth

The end of last week’s continued gains reaffirms on interim base/correction/recovery count introduced in 03-Jan’s Technical Webcast and leave smaller-degree corrective lows in their wake at 22.21 and 21.32 that this market is now minimally required to relapse below to defer or threaten this interim bullish call.  Per such, these levels serve as our new mini and short-term parameters from which non-bearish decisions like short-covers and bullish punts can be objectively rebased and managed.

The recovery from 26-Dec’s 20.03 low is clear in the daily chart below and has now retraced 50% of Nov-Dec’s 28.14 – 20.03 decline that we believe is only the initial 1st-Wave of a major peak/reversal Apr’20 – Nov’23’s secular bull market.  This peak/reversal count further suggests that the clear and present recovery is “just” a (suspected 2nd-Wave) correction within a multi-month peak/reversal process that will eventually present an outstanding and long-term risk/reward opportunity from the bear side.  Until/unless this market arrests this clear and present recovery however, we don’t want to underestimate 1) its extent or 2) being totally wrong on the peak/reversal count and a resumption of the secular bull market to new highs above 07-Nov’s 28.14 high.

We’ve noted the 50% and 61.8% retraces of Nov-Dec’s decline NOT as resistance levels but as “areas of interest” around which to keep a keen eye on MOMENTUM, where a CONFIRMED bearish divergence below a prior corrective low is required to break the current uptrend and reject/define a more reliable high and resistance from which a resumed bearish policy and exposure can then be objectively based and managed.  Until/unless such a mo failure stems the rally, it’s upside potential is considered indeterminable.

To negate this major peak/reversal count, the bull needs to take out Nov’s 28.14 high that remains intact as a key long-term bear risk parameter.

To reiterate, the elements on which our major peak/reversal count is predicated include:

  • the market’s Nov’23’s engagement and rejection of the upper-quarter of its massive but lateral historical range
  • a bearish divergence in MONTHLY momentum
  • historically frothy bullish sentiment/contrary opinion levels
  • a textbook complete 5-wave Elliott sequence from Sep’22’s 17.19 low to 07Nov23’s 28.14 high that
    • arguably completed the even longer-term wave count from Apr’20’s 9.21 low
  • 07-Nov’s 28.14 high coming with 21-ticks of the (28.35) 0.618 progression of Apr’20 – Nov’21’s 9.21 – 20.69 rally from Sep’22’s 17.19 low on a weekly log scale basis above.

This is a unique and compelling list of technical facts and observations that warns of a peak/reversal of 2020- 2023’s secular bull market into a new secular bear market that could span quarters or even years ahead.  And again, to negate this call, all the bull needs to do is take out Nov’s obviously key 28.14 high.

These issues considered, an interim bullish policy and exposure remain advised with a failure below 22.21 and 21.32 required to threaten and then negate this count and warrant neutralizing this interim bullish exposure and transitioning into a new bearish policy.  In lieu of such weakness, further suspected corrective gains remain anticipated straight away.

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