Posted on Dec 19, 2023, 07:14 by Dave Toth
The 240-min chart below shows Fri’s continuation of what’s now a 2-1/2-month reversal that leaves smaller-degree corrective lows in its wake at 135.81 and 134.37. These are the minimum levels this market is now required to fail below to even defer, let alone threaten this impressive base/reversal environment. Per such, these levels are considered our new mini and short-term parameters to which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of still-advised bullish policies and exposure.
On a broader scale, the sheer extent of the rally from 23-Oct’s 127.18 low has “3rd-wave” written all over it as part of an eventual 5-wave sequence up from 04-Oct’s 126.62 low. Such an initially impulsive 5-wave sequence is a key requirement of a broader base/reversal environment as is the bullish divergence in WEEKLY momentum shown in the weekly chart below. These two elements satisfy two of our three key reversal requirements, with proof of 3-wave corrective behavior on a subsequent relapse attempt satisfying the critical third requirement.
Als reinforcing a base/reversal-threat environment are the market’s gross failure to sustain Sep/Oct’s break below a TON of former support-turned-resistance around the 130-handle-area and the prospect that the entire 3-YEAR decline from Dec’20’s 178.77 high to 04Oct23’s 126.62 low is a complete and massive 5-wave Elliott sequence as labeled below. If correct, this count warns of a correction or reversal higher that would be expected to be protracted in scope, spanning months or even QUARTERS.
To jeopardize the 5-wave impulsive integrity of this initial stage to a major bullish count at this juncture, the market is required to fail below the 130.20-to-130.11-area that houses 12-Oct’s 130.20 suspected 1st-Wave high as well as 24-Nov’s 130.11 smaller-degree corrective low. Given the 3rd-wave magnitude of the rally from 23-Oct’s 127.18 suspected 2nd-wave low however, we would not expect this market to come anywhere near that 130-handle-area. Per such, even longer-term institutional players may want to use 08-Dec’s admittedly smaller-degree corrective low at 134.37 as a bull risk parameter, acknowledging and accepting whipsaw risk in exchange for much steeper nominal risk below 130.11.
These issues considered, a bullish policy remains advised with a failure below at least 135.81 and preferably 134.37 required to pare or neutralize exposure in order to circumvent the depths unknow of a corrective relapse. In lieu of weakness below these levels, further and possibly accelerated gains remain anticipated.