Overnight’s break below 19-Sep’s 92.73 low reaffirms our broader peak/reversal count introduced in 05-Sep’s Trading Strategies Blog and leaves smaller- and larger-degree corrective highs in its wake at 93.27 and 94.03, respectively, that this market is now required to recover above to defer or threaten this count calling for further and possibly protracted losses that could span months.  Per such, these levels are considered our new short- and longer-term risk parameters from which a still-advised bearish policy and exposure can be objectively rebased and managed.

As we’ve discussing for nearly a month now, what we believe is a major, if intra–FOUR-YEAR-range peak/reversal threat is predicated on:

  • 05-Sep’s bearish divergence in momentum from
  • the same upper-quarter of the 4-year range that warned of and accompanied Mar’18’s major peak/reversal
  • a 3-wave and thus corrective recovery from Nov’18’s 87.67 low in which
  • the prospective C-Wave from Mar’s 89.25 low came within 25-pips of equaling (i.e. 1.000 progression) Nov-Dec’18’s (A-Wave) rally from 87.67 t0 94.59
    • (NOTE: these are the same 3-wave, 1.000 progression elements that characterize Dec’16 – Mar’18’s recovery and major peak/reversal)
  • historically frothy bullish sentiment DESPITE the bull only reaching the upper-quarter of a massive but lateral range.

Indeed, we believe it’s this frothy bullish sentiment that has reached levels not seen since Dec’11 (in the case of our RJO Bullish Sentiment Index) that leaves the market vulnerable to not only lower levels, but potentially protracted losses that could span months or event quarters and reach the lower-quarter of the long-term lateral range around 85 or below.

These issues considered, a full and aggressive bearish policy and exposure remain advised with a recovery above 93.27 required for shorter-term traders to step aside.  Commensurately larger-degree strength above 94.03 is required for long-term players to take defensive steps to circumvent the heights unknown of what we’d suspect at that point is a correction of Aug-Oct’s initial (1st-Wave) down.  In lieu of such strength, further and possibly accelerated losses are expected straight away.

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