We introduced 30-Apr’s 2965 high as one of developing importance in 01-May’s Technical Blog following that day’s bearish divergence in very short-term momentum.  Now, nearly two weeks on and after thus far surviving a severe retest of that high, the market is testing 04-May’s 2771 low, the break of which will render it an initial counter-trend low and confirm a bearish divergence in daily momentum.  Such a mo failure may prove critical following the extent and impulsiveness of Feb-Mar’s plunge that warns of a massive peak/reversal-threat process in which Mar-Apr’s recovery attempt is arguably a (B- or 2nd-Wave) correction within that process and ahead of a resumption of Feb-Mar’s downtrend and dire long-term consequences.

Commensurately larger-degree weakness below 27-Mar’s 2635 (prospective 1st-Wave) high and key long-term risk parameter remains required to reinforce this long-term bearish count.  Interim weakness below 2771 is a reinforcing stepping stone towards that broader bearish count and will ingrain 30-Apr’s 2965 high as an increasingly pivotal risk parameter to a bearish policy.

As previously discussed, Feb/Mar’s decline breaks the secular bull trend that dates from Mar’09’s 666 low and leaves 19-Feb’s 3398 high in its wake as THE key risk parameter the market needs to recoup to mitigate any broader bearish counts and resurrect the secular bull.  In lieu of such strength, recovery attempts, even a more extended one like Mar-Apr’s approximate 61.8% retrace, fall well within the bounds of a correction within a peak/reversal threat process that may be historic in scope.

Market sentiment levels remain historically depressed, which is a little surprising given the extent of Mar-Apr’s extensive recovery and and may reinforce more interim strength if this market can recover above 2965.  Under the broader circumstances however and especially if the market breaks 2771 and then 2635, the market’s potential for downside vulnerability should not be underestimated.

In sum, a bearish policy remains advised for short-term traders with a recovery above 2965 required to negate this call and warrant its cover.  A cautious bullish policy remains OK for long-term players with a failure below 2771 required to threaten this call enough to warrant moving to a neutral-to-cautiously-bearish stance with a recovery above 2965 required to negate this call and warrant its cover.  A break below 2771 and especially 2635 exposes potentially protracted losses thereafter.