Posted on Jan 31, 2023, 09:35 by Dave Toth
In 23-Jan’s Technical Blog following that day’s break to a new low below 10-Jan’s 7.20 low, we identified 18-Jan’s 7.60 Globex day-session high as the latest smaller-degree corrective high the market needed to recoup to confirm a bullish divergence in short-term momentum, jeopardize a more immediate bearish count and reinforce a count calling for a larger-degree correction or reversal higher. As of the momentum, the hourly chart below shows the market has yet to break that 7.60 high. But the past week’s performance is not unimpressive after failing to sustain levels below former support-turned-resistance around the 7.20/7.23-area and we are expecting a confirmed bullish divergence in short-term mo above 7.60.
The important by-product of this expectation is the market’s definition of 23-Jan’s 7.12 low as one of developing importance and our new short-term risk parameter this market is now required to relapse below to mitigate a base/correction/recovery count and reinstate the new secular bear trend. The interim directional challenge is that the market is only back to the middle of the past couple months’ lateral range where the odds of aimless whipsaw risk are approached as higher the risk/reward metrics of initiating directional exposure are poor. But given some interesting intermediate-to-longer-term elements discuss below, we believe this market may be poised to challenge 30-Dec’s 7.99 larger-degree corrective high and above.
On a broader scale, the daily chart above shows that commensurately larger-degree strength above 30-Dec’s 7.99 larger-degree corrective high and key longer-term bear risk parameter remains required to, in fact, break the broader downtrend from 10-Oct’s 9.62 high. But amidst historically bearish sentiment/contrary opinion levels shown in the weekly log chart below, even a short-term bullish divergence in momentum above 7.60 cannot be ignored as a reinforcing factor to a developing base/correction/reversal count. Indeed, at a FIVE YEAR low of 30% reflecting 53K Managed Money long positions reportable to the CFTC versus a whopping 127K shorts, the fuel for upside vulnerability is easy to see.
Lastly and on an even broader monthly log active-continuation basis, the chart below shows the market smack in the middle of its historically massive but lateral range where the odds of aimless whipsaw risk are greater, warranting a more conservative approach to risk assumption that emphasizes tighter but objective directional risk parameters like 7.12 and 7.99.
These issues considered, shorter-term traders are advised to neutralize bearish exposure and move to a neutral-to-cautiously-bullish stance at-the-market (7.57) with a relapse below 7.12 negating this call, reinstating the major bear and warranting a return to a bearish stance. Longer-term commercial players are advised to pare bearish exposure to more conservative levels and neutralize remaining exposure on commensurately larger-degree strength above 7.9 ahead of a correction or reversal higher that could be significant in scope.
