Posted on Mar 08, 2023, 10:52 by Dave Toth

In 28-Feb’s Technical Blog we identified 27-Feb’s 2735 low as the latest smaller-degree corrective low the market needed to sustain gains above to maintain a more immediate bullish count, and per such our short-term bull risk parameter.  The 240-min chart below shows today’s failure below this level, confirming a bearish divergence in momentum that defines 01-Mar’s 2856 high as the END of at least a textbook 5-wave Elliott sequence up from 03-Feb’s 2540 larger-degree corrective low labeled below that now exposes at least a correction of this portion of the major bull trend.  But as we’ll show below, there are ancillary factors that warn that a peak/reversal threat of a larger-degree or scale may be in the offing.  As a result of today’s bearish divergence in momentum, we’re defining last week’s 2856 high as our new short-term but key risk parameter from which non-bullish decisions like long-covers and bearish punts can be objectively based and managed.

On a broader scale, the daily chart above and weekly log chart below show the magnitude of Sep-Mar’s major rally.  As always, we cannot conclude a major peak/reversal process from proof of just smaller-degree weakness like today’s mo failure.  However, the combination of what looks to be a textbook and major 5-wave Elliott sequence from 26-Sep’s 2192 low and the market’s proximity to the extreme upper recesses of its massive but lateral range over the past SIX YEARS warn that today’s short-term weakness cannot be overlooked as the start of a peak/reversal count that could/would be major in scope.

To be sure, commensurately larger-degree weakness below 03-Feb’s 2540 larger-degree corrective low and long-term bull risk parameter remains required to, in fact, break Sep-Mar’s uptrend.  And former 2650-to-2700-area resistance remains intact as a new support candidate.  But until and unless this market recoups last week’s 2856 high and/or this developing sell-off is arrested by a countering bullish divergence in momentum from the 2650-to-2700-area, traders are urged to beware a peak/reversal threat that could be major in scope.

These issues considered, both short- and long-term traders are advised to move to a neutral/sideline position for the time being to circumvent the depths unknown of a correction or reversal lower.  We will be watchful for proof of 3-wave corrective behavior on a recovery attempt to reinforce this peak/reversal call and present a favorable risk/reward selling opportunity.

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