Overnight’s recovery above 30-Jun’s 18.76 corrective high confirmed our suspicions discussed in yesterday morning’s Technical Blog that the combination of waning downside momentum at the extreme lower recesses of the multi-quarter range left it vulnerable to another intra-range rebound and thus questioned the risk/reward merits of a continued bearish policy. This recovery above 18.76 confirms a bullish divergence in daily momentum that defines Tue’s 17.71 low as the end of a 5-wave Elliott sequence down from 17-May’s 20.29 high and our new risk parameter from which non-bearish decisions like short-covers and bullish punts can be objectively based and managed.
The problem and challenge now of course is the market’s position back in the middle of the lateral range that has dominated this market since Aug/Sep’21 and resurrects the odds of aimless whipsaw risk. Indeed, the brisk/reward merits of initiating directional exposure from the middle-half of the established range are abhorrent, warranting a neutral/sideline policy for the time being. Now that the market has stemmed May-Jul’s downtrend however and rejected/defined a more reliable low, support and risk parameter at 17.71, we can watch for proof of 3-wave corrective behavior on a setback attempt that, preferably, tests the (18.22-area) lower-quarter of this year’s range AND a setback-stemming bullish divergence in short-term mo to present a favorable and preferred risk/reward punt from the bull side. This is basically the inverse of this market satisfying our peak/reversal requirements in late-May/early-Jun.
On a broader scale, the weekly log active-continuation chart shows the magnitude of the lateral range confinement that dates from Aug/Sep’21. Until and unless broken by a break below Feb’s 17.49 low, this merely lateral range cannot be ignored as a corrective/consolidative event that warns of a resumption of the secular bull trend that preceded it. This week’s “outside WEEK up” (lower low, higher high and higher close than last week’s range and close) reinforces at least an interim intra-range recovery and possibly a resumed long-term bullish count.
These issues considered, a neutral/sideline policy is advised for the time being. We will be watchful for a 3-wave corrective rebuttal to the past few days’ rebound AND a relapse-stemming bullish divergence in short-term mo, hopefully from the 18.22-area OB, for a preferred risk/reward opportunity from the bull side. In lieu of such prerequisites, further lateral-to-higher prices are anticipated.