Posted on Jun 02, 2023, 11:07 by Dave Toth
In Wed’s Technical Blog we discussed that day’s recovery above 24-May’s 82.02 corrective high and short-term bear risk parameter that broke mid-to-late-May’s portion of the major bear trend and warranted shorter-term traders to step aside from bearish exposure. Given the extent and uninterrupted nature of this week’s spasm recovery however, the only level of any technical merit below the market was last Fri’s 74.02 low.
With today’s continued recovery above yesterday’s 83.97 high however, the hourly chart below sows that the market has defined yesterday’s 80.90 low as the latest smaller-degree corrective low and level this market now needs to sustain gains above to maintain a more immediate bullish count. Its failure to do so will confirm a countering bearish divergence in short-term momentum that will break this week’s uptrend. And given the magnitude of this year’s massive drawdown, we believe such a short-term mo failure below 80.90 will expose AT LEAST a steeper corrective rebuttal to this week’s spike, if not a resumption of the major bear trend to new lows below 74.02. Per such, we’re identifying 80.90 as our new and sharply tightened short-term parameter from which shorter-term traders can objectively manage non-bullish decisions like long-covers and resumed bearish exposure.
Moving back, the magnitude of this year’s major downtrend is clear in the daily (above) and weekly (below) log scale charts of the Jul contract. The forces that have driven this bear are unlikely to evaporate in such short order as a week and a 10-cent spike. And actually, it’s been our experience that the sharper and more obvious and emotional such a counter-trend move is, the greater the likelihood is that the market subsequently experiences AT LEAST more protracted corrective rebuttal to that move, if not a resumption of the major trend that preceded it. We believe a failure below 80.90 will confirm one of these two scenarios.
If this still-bearish longer-term count is just plain wrong, commensurately larger-degree strength above 16-May’s 88.75 larger-degree corrective high and our key long-term bear risk parameter remains required for long-term commercial players to neutralize exposure.
Lastly, and stepping bac even further to a long-term monthly active-continuation perspective, the chart below shows this market’s residence still deep within the middle-half bowels of its massive but lateral historical range where we’ve highlighted the greater of odds of aimless whipsaw risk typical of such range-center environs. This week’s counter-trend spike is precisely such a whipsaw example that places emphasis on identifying objective risk parameters and flexion points commensurate with one’s personal risk profile.
These issues considered, a bearish policy remains advised for long-term commercial players with a recovery above 88.75 required to negate this call and warrant its cover. Shorter-term traders have been advised to move to a neutral/sideline position and are further advised to reset at least cautious bearish exposure on a failure below 80.90 ahead of at least a steeper corrective setback or a resumption of the major bear trend. Risk on such a sub-80.90 short would be just above whatever high is left in the wake of that sub-80.90 failure.