While the market hasn’t broken 01-Sep’s 3.0945 high yet to confirm 03-Sep’s 2.9535 low as the end or lower boundary to yet another bull market correction, we’re nonetheless identifying that 2.9535 low 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 bullish policy. We’re tightening our short-term bull risk to this 2.9535 level for a number of reasons:
- a failure below that level would make it an initial counter-trend low and confirm a bearish divergence in relatively short-term momentum
- while a bearish divergence in mo below 2.9535 would NOT be of a sufficient scale to conclude the end of a 5-wave Elliott sequence from 19-Mar’s 1.9725 low, we believe the count is good enough to begin biasing towards a peak/reversal environment
- waning momentum on a WEEKLY basis below (confirmed below 13-Aug’s 2.7690 next larger-degree corrective low) amidst
- historically frothy (82%) levels in our RJO Bullish Sentiment Index not seen since Jan’18 that warned of and accompanied a 16-month, 40% decline.
To be sure, commensurately larger-degree weakness below 13-Aug’s 2.7690 larger-degree corrective low and key risk parameter remains required to, in fact, break the six-month uptrend. This level remains intact as our key long-term risk parameter for long-term institutional and commercial players. But for shorter-term traders with tighter risk profiles and for even longer-term players who may want to manage some of their bull risk more conservatively, a failure below 2.9535 provides an excellent and objective time and place to do so. Until and unless the market fails below 2.9535, the trend up and bullish count and policy remain intact with further gains not a surprise.