Yesterday’s break below Fri’s 13.86 low reaffirms our peak/reversal count introduced in 26-Feb’s Technical Blog and leaves yesterday’s 14.40 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to confirm a bullish divergence in short-term momentum, stem the slide and expose a corrective rebuttal to the decline from 12-Feb’s 15.29 high.  Per such, this 14.40 level serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a still-advised bearish policy and exposure.

From a longer-term perspective, 12-Feb’s 15.29 high in the May contract remains intact as our key long-term risk parameter the market needs to recoup to negate our major peak/reversal count and reinstate a base/reversal process that dates from Aug’18.  Until such 15.29+ strength is shown however, our major peak/reversal count remains predicated on these unique and compelling technical facts:

  • a confirmed bearish divergence in daily momentum that broke Sep-Feb’s uptrend
  • a complete and textbook 5-wave Elliott sequence from 12Sep19’s 11.89 low to 12-Feb’s 15.29 high as labeled in the daily log scale chart of the May contract above
  • historically frothy levels in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC not seen in THREE YEARS
  • Fibonacci progression relationships in the lower-to-mid-15-handle that reinforce not only a 5-wave sequence up from last Sep’s low, but also warn that the even broader recovery attempt from Aug’18’s 9.91 low is just a 3-wave and thus corrective structure that warns of a resumption of the secular bear trend to new lows below 9.91
  • the market’s rejection thus far of the (15.45) 38.2% retrace of Sep’16 – Aug’18’s 24.10 – 9.91 decline on a monthly log scale basis below.

This is long and compelling list of technical facts that warn of at least an extensive correction of Sep’19 – Feb’20’s rally, and quite possibly a resumption of the secular bear market to new lows below 9.91.  Time, of course, will tell on this call.  But until and unless this market recovers above 12-Feb’s 15.29 high and key risk parameter specifically, we believe these facts have presented an outstanding risk/reward opportunity from the bear side.

In sum, a bearish policy and exposure remain advised with a recovery above 14.40 required for shorter-term traders to move to the sidelines for a preferred risk/reward re-selling opportunity from the 14.70-area or higher and for longer-term players to pare bearish exposure to more conservative levels.  Ultimately however, a recovery above 15.29 remains required to negate this peak/reversal count altogether, warrant the cover of any remaining bearish exposure and return to a bullish policy.  In lieu of strength above at least 14.40 and preferably 15.29, further and possibly protracted losses straight away are expected.

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