Technicals, May 2, 2012; 7:55am
While the extent and impulsiveness of the last couple months' 14% collapse in the Jun contract exposes a long-term bearish count that suggests the recovery from last Sep's 82.40 low is only a 3-wave and thus corrective structure ahead of steep sub-82-losses, the market's return to the lower-quarter of the past 7-month range amidst some of the least bullish sentiment readings in 2-1/2 years warns us to be watchful for even a short-term bullish divergence in momentum that could expose a sharp correction or reversal higher. Indeed, at a current 50% reading shown in the weekly log scale chart below, our proprietary MRT Bullish Sentiment Index of hot Managed Money positions reportable to the CFTC is the lowest since Oct'09. Combined with the market's proximity to the lower recesses of the 7-month range, we must acknowledge the prospect of upside vulnerability.
This said, the labored recovery attempt from last Sep's low is clearly only a 3-wave affair as labeled. Left unaltered by a break above last month's 94.45 high, this mere 3-wave recovery is arguably a corrective structure that, coming on the heels of Mar-Sep'11's 104.15 - 82.40 decline, warns of an eventual resumption of last year's bear to potentially significant losses below 82.40. And the clear and present downtrend could be THAT bear that simply keeps on truckin'. So there are legitimate long-term directional arguments both ways.
The hourly chart above details the past month's trendy, impulsive decline with Mon's latest spate of weakness defining last Thur's 88.25 high as the latest corrective high and specific minimum risk parameter this market is now required to recoup to confirm a bullish divergence in momentum shown in the daily chart below. IF the market can recover above 88.25- which may be this market's single most important technical level- odds would suggest that the portion of the 2-month collapse from 09-Apr's 94.40 high is a complete 5-wave Elliott Wave sequence that would contribute to a larger-degree correction or reversal higher. UNTIL such 88.25+ strength is shown, the trend is, in fact, down and should not surprise by its continuance or acceleration.
In sum, a full bearish policy and exposure remain advised with strength above 88.25 required to threaten this call enough to warrant neutralizing all bearish exposure in order to circumvent the heights unknown of a larger-degree correction or reversal higher. In lieu of such 88.25+ strength, further and possibly accelerated losses remain expected, and possibly to levels below last Sep's pivotal 82.40 low.
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