Posted on Mar 21, 2023, 07:27 by Dave Toth

Starting out with a very long-term perspective, we’d like to remind traders of this market’s reversion to deep within the middle-half bowels of its massive but lateral historical range shown in the monthly chart below.  As always, such range-center conditions hardly surprise with aimless whipsaw risk that is the bane to all trend-followers, making for a particularly treacherous and challenging trading environment.  Under such circumstances, a more conservative approach to directional risk assumption is urged as the odds of being WRONG on directional bets go up.

Drilling down a bit to a weekly scale, the close-only chart below shows the still-arguable broader downtrend from last summer’s 120.47 high weekly close within the historical range.  On this basis, a recovery above 20-Jan’s 81.69 larger-degree corrective high (82.66 on an intra-day basis we’ll discuss below) is required to confirm a bullish divergence in momentum of a scale sufficient to, in fact, break the 9-month downtrend.  For longer-term commercial players, these commensurately larger-degree corrective highs and bear risk parameters remain intact, with former 70-to-72-handle-area support considered new near-term resistance.

This chart also shows a neighboring pair of Fibonacci retracement and progression relationships at 68.82 and 67.84, respectively, that could prove interesting IF/when accompanied by a confirmed bullish divergence in momentum.  For the time being and on this longer-term scale, the market has yet to provide the evidence to nullify a longer-term bearish count.

Drilling down even further to a daily log scale basis, the chart below more clearly shows the now-former support around the 70.08-to-72.46-area that, since broken, is considered a new resistance candidate for longer-term players.  MINIMALLY, this market should be required to recover into a 73-handle to begin to threaten the 9-month downtrend and warn of a correction higher that may be more protracted in scope.  Longer-term commercial players would be advised to pare bearish exposure to more conservative levels if/when this market proves enough strength to recover into a 73-handler, with commensurately larger-degree strength above 18-Jan’s 82.66 larger-degree corrective high and key long-term risk parameter required to neutralize remaining exposure.

On a very short-term basis, the 240-min chart below shows the nicely developing potential for a bullish divergence in momentum following the market’s break yesterday to another round of new lows, this time below last week’s 65.65 low.  This latest spate of weakness leaves Fri’s 69.83 high in its wake as the latest smaller-degree corrective high and the minimum level this market now needs to recoup to CONFIRM this divergence and conclude a complete 5-wave Elliott sequence down from 07-Mar’s 80.94 high that would expose at least a correction of this portion of the bear.  Per such, this 69.83 level serves as our new short-term bear risk parameter pertinent to shorter-term traders with tighter risk profiles.

These issues considered, a bearish policy and exposure remain advised with a recovery above 69.83 sufficient for shorter-term traders to move to a neutral/sideline position and further strength into a 73-handle for longer-term commercial players to pare bearish exposure to ore conservative levels.  In lieu of such strength, a continuation of the 9-month bear trend should not surprise.  But neither should a short-term pop above 69.83.  For let’s not forget this market’s position deep, deep within the middle-half bowels of its historical range where the greater odds of aimless whipsaw risk warrant a more conservative approach to risk assumption.

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