Posted on Jan 30, 2023, 07:58 by Dave Toth

By recovering above 23-Dec’s key 21.18 high overnight, the market has nullified the bearish divergence in weekly momentum and our major peak/reversal count introduced in 06-Jan’s Technical Blog and reinstated the secular bull market that dates from Apr’20’s 9.21 low.  As a result of this resumed major bull trend, the daily chart above shows that the market has defined 09-Jan’s 18.92 low as the latest larger-degree corrective low and our new long-term bull risk parameter from which a resumed bullish policy and exposure can be objectively based and managed by longer-term commercial players.

On a shorter-term basis pertinent to shorter-term traders with tighter risk profiles, the 240-min chart below shows 18-Jan’s 20.25 high as the suspected 1st-Wave high of an eventual 5-wave sequence up from 18.92 and a level we expect this market to easily be able to sustain gains above in order to maintain the impulsive integrity of this count.  A failure below 20.25 will jeopardize this count and resurrect a peak/reversal threat.  Per such, we’re defining 20.25 as our new short-term bull risk parameter.

On a broader scale, the weekly log chart above shows the market’s negation of 06-Jan’s bearish divergence in weekly momentum that chalks up Dec-Jan’s relapse as another correction and reinstates and reaffirms the secular bull trend and 09-Jan’s 18.92 larger-degree corrective low and key long-term risk parameter the market now needs to sustain gains above to maintain a bullish count.  This chart also shows historically frothy sentiment/contrary opinion levels typical of major peak/reversal-threat environments.  But since the major bull trend has resumed, sentiment/contrary opinion is not an applicable technical tool until/unless the market confirms a bearish divergence in momentum needed to break the clear and present uptrend.

On an even broader monthly basis, the log scale chart below shows the market’s proximity to the (21.41) 61.8% retrace of 2011 – 2020’s entire secular bear market from 36.08 to 9.21.  But since this is merely a “derived” relationship, it bears no practical use until/unless accompanied by a bearish divergence in momentum needed to even defer, let alone threaten the uptrend.  Per such, there are NO levels of any technical merit shy of 2016’s 24.10 high.  This does not mean we’re forecasting a move to a 24-handle.  But it certainly does mean that until and unless this market threatens the clear and present uptrend with a confirmed bearish divergence in momentum, the market’s upside potential is indeterminable and potentially extreme, including a run at a 24-handle.

These issues considered, a bullish policy remains advised for shorter-term traders with a failure below 20.25 required to negate this call and warrant its cover.  Longer-term commercial players are advised to return to a bullish policy and exposure from the 20.20-area OB with a failure below 20.25 required to pare exposure to more conservative levels and commensurately larger-degree weakness below 18.92 to neutralize remaining exposure.  In lieu of a failure below at least 20.25, further and possibly accelerated gains are anticipated straight away with former 21.00-area resistance considered new near-term support.

Market Insights Senior Analyst

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