Posted on Nov 16, 2023, 08:18 by Dave Toth

Stemming from an area of former support-turned-resistance around the 80-handle-area, the past couple days’ relapse identifies Tue’s 79.77 as the end of what we believe is thus far only a 3-wave event from 08-Nov’s 74.91 low.  Left unaltered by a recovery above 79.77, we believe this high defines the end or upper boundary of another correction within our broader peak/reversal count introduced in 02-Oct’s Technical Webcast ahead of a resumption of month-and-a-half decline to new lows below 74.91.  Per such, we’re defining 79.77 as our new short-term parameter from which shorter-term traders can objectively rebase and manage the risk of a still-advised bearish policy and exposure.

The daily log chart above shows the developing downtrend from 28-Se’s 95.03 high that can be one of only two things at this point:

  1. a 3-wave correction of Jun-Sep’s uptrend or
  2. an eventual 5-wave reversal of this year’s entire 3-wave and thus corrective recovery from 20-Mar’s 64.36 low shown in the weekly chart below.

This means the portion of the decline from 20-Oct’s 89.85 high is either the completing C-Wave of the bull market correction OR the dramatic 3rd-Wave of a major reversal lower.  The latter, bearish count would be expected to be characterized by sustained, trendy, impulsive and increasingly obvious behavior lower.  Indeed, the 1.618 progression of late-Sep/early-Oct’s prospective 1st-Wave from 95.03 to 81.50 taken from the prospective 2nd-Wave high at 89.95 doesn’t cut across until the 70.08-area.

Conversely, if the market is trying to complete a correction “down here somewhere, it must at least recoup Tue’s 79.77 high to render it an initial counter-trend high and confirm a bullish divergence in daily momentum.  Secondarily, a recovery above 06-Oct’s suspected 1st-Wave low at 81.50 is required to jeopardize the impulsive integrity of the 5-wave reversal lower.  Per such, we’re identifying 81.50 as our new key long-term bear risk parameter pertinent to longer-term commercial players.  Until this market recoups at least 79.77 and preferably 81.50, further and possibly protracted losses remain expected.

Lastly, we would remind traders of this market’s residence still deep, deep within the middle-half bowels of its massive but lateral historical range where the odds of aimless whipsaw risk are still approached as high, warranting a more conservative approach to directional risk assumption.  Herein lies the importance of identifying tighter but objective risk parameters like 79.77 and 81.50.

These issues considered, a bearish policy and exposure remain advised with a recovery above 769.77 required for shorter-term traders to move to the sidelines and commensurately larger-degree strength above 81.50 for longer-term commercial players to follow suit.  In lieu of such strength, further and possibly protracted losses remain expected.

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