Technicals, February 21, 2012; 9:30am
While the past few days' break below 09-Feb's 130.18 low contributes to a peak and reversal threat that could be major in scope, traders are advised to beware an interim corrective recovery within the broader peak/reversal process if the market cannot sustain recent short-term losses below Fri's 130.315 minor corrective high detailed in the 240-min chart below. Such short-term strength will confirm a bullish divergence in momentum that will end the latest phase of the developing decline from 15-Feb's 131.245 high and expose at least an interim correction higher. But given the scope of the secular bull trend, another round of new all-time highs cannot be ruled out. Per this short-term development, our recommendation in Thur's Trading Strategy Blog to establish shorts at 131.06 is cancelled.
The daily chart below shows the prospective break of the broader uptrend from 27-Oct's 127.06 low that contributes to a major peak/reversal threat for reasons we'll discuss below, not the least of which is the market's gross failure to sustain 131-3/4+ "breakout" gains. But again, given the scope of the secular advance, this month's sell-off attempt may be nothing more than a mid-Jan-type head-fake, so obviously more evidence of a new downtrend is needed to reaffirm a broader peak/reversal threat. And this evidence comes in the form of continued trendy, impulsive behavior on breaks and labored, 3-wave, corrective behavior on recovery attempts.
As a direct result of the past week's break, the market has defined 15-Feb's 131.25 high as THE high and risk parameter this market now needs to recoup to render Feb's sell-off attempt a 3-wave and thus corrective structure consistent with the major bull trend ahead of another round of new all-time highs above 132.11. While the market sustains levels below 131.25, we believe odds have shifted towards a larger-degree (i.e. C-Wave) correction OR a major (3rd-Wave) reversal lower.
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