Against the backdrop of the secular bull trend, the past week-and-a-half’s mere lateral chop is likely just another corrective/consolidative affair ahead of a resumption of the major bull. However, a break below 28-Mar’s 134.05 lower boundary to this structure will, in fact, confirm a bearish divergence in DAILY momentum and confirm at least a correction of Mar’s textbook and complete 5-wave Elliott sequence from 115.37 to 141.80.
Such a sub-134.05 mo failure will confirm AT LEAST the intermediate-term trend as down and leave Tue’s 140.45 high in its wake as THE level the market would then need to recoup to render the sell-off attempt from 28-Mar’s 141.80 high a 3-wave and thus corrective event that would then re-expose the secular bull. Until and unless the market recouped that 140.45 high, there would be no way to know that the decline from that 140.45 high isn’t the dramatic 3rd-Wave of a peak/reversal threat that could be major in scope given historically stratospheric sentiment levels. Per such, we’re defining 134.05 as our new short-term but potentially pivotal short-term risk parameter to which traders are advised to rebase and manage the risk of a still-advised bullish policy and exposure.
It’s important to understand that the correction down from 141.80 could easily include a break below 134.05 before the secular bull comes roaring back. But at that point, we’d have Tue’s 140.45 high around which to objectively make that judgement. There is NO level below 134.05 shy of 07-Mar’s 115.37 larger-degree corrective low below which we can conclude a broader peak/reversal count. Erring on the side of a more conservative approach to risk assumption “up here”, we urge at least short-term traders and even longer-term players to acknowledge and accept whipsaw risk, back above 140.45, in exchange for much deeper nominal risk below 115.37 by neutralizing or at least paring bullish exposure on a failure below 134.05.
The daily log chart above shows the nicely developing POTENTIAL for a bearish divergence in momentum. This potential will be CONFIRMED to the point of non-bullish action like long-covers and bearish punts on a break below 134.05. This chart also shows the extent and uninterrupted nature of the second-half of Mar’s explosive rally that left nothing in the way of former battlegrounds that could now be looked to as support candidates shy of former 125-handle-area resistance from early-Feb. Per such, the market’s downside potential below 134.05 is considered indeterminable and potentially severe, especially given the backdrop of stratospheric sentiment/contrary opinion levels shown in the weekly log chart below.
This pross extent to which the world has its neck sticking out on the bull side is not an inhibitor the bull until and unless the market breaks the simple uptrend pattern of higher highs and higher lows needed to reject/define a more reliable high and level from which non-bullish decisions can only then be objectively based and managed. We believe a failure below 134.05 will threaten the bull trend enough to exact such a peak/reversal threat and, most importantly, identify highs like 140.45 and certainly 141.80 as objective risk parameters to non-bullish action.
Finally, the market’s flirtation with the upper-quarter of its historical range on a monthly log scale basis would also be a contributing factor to a potentially major peak/reversal threat IF/WHEN the market arrests its clear and present and major uptrend. A relatively minor failure below 134.05 would NOT be of a sufficient scale to conclude anything more than a slightly larger-degree correction within the secular bull. but we would remind traders that all larger-degree momentum failures that break secular bull trends begin with smaller-degree mo failures below levels like 134.05.
These issues considered, a bullish policy and exposure remain advised with a failure below 134.05 threatening this call enough to warrant moving to a neutral/sideline position in order to circumvent the depths unknown of a more protracted correction or possibly the start of a major reversal lower. In lieu of such sub-134.05 weakness, the past week’s mere lateral chop remains advised to first be approached as a corrective affair ahead of further and possibly steep gains.
