Posted on Sep 28, 2023, 06:04 by Dave Toth

Yesterday’s clear, impulsive break below 29-Jun’s 1900 low confirms our broader bearish count introduced in 21-Sep’s Technical Webcast following that day’s bearish divergence in short-term momentum that arrested mid-Sep’s corrective recovery attempt.  This clear resumption of May-Jun’s downtrend leaves 20-Sep’s 1968.9 high in its wake as the end of a textbook lateral triangle correction and the larger-degree corrective high this market is now required to recoup to mitigate a broader bearish count and resurrect a broader bullish one.  Per such, 1968.9 serves as our long-term bear risk parameter from which longer-term commercial players and investors can objectively rebase and manage the risk of a continued bearish policy and exposure.

On a shorter-term basis and given the trendy, impulsive manner in which the past week’s downtrend has unfolded, we’re defining 21-Sep’s 1933.1 low as the initial and smaller-degree 1st-Wave low of an eventual 5-wave sequence down and level this market should not come anywhere near per this count.  For the time being then, this 1933.1 level serves as our new short-term bear risk parameters pertinent to shorter-term traders.

This said and per this count, we suspect an interim minor 4th-Wave corrective bounce somewhere along the line and a subsequent (5th-Wave) resumption of the bear before the market can even create the POTENTIAL for a countering bullish divergence in momentum.  Following this price action, we’ll be able to trail this shorter-term bear risk to that 4th-Wave corrective bounce high.

From a much longer-term perspective, yesterday’s sub-1900 break reaffirms a major peak/correction/reversal count stemming from the unique and compelling combination of:

• mid-Aug’s bearish divergence in WEEKLY momentum following the weekly close below 30-Jun’s 1927.8 low and pivotal resistance-turned-support area
• the market’s rejection of the extreme upper recesses and resistance of the past THREE-YEAR lateral range
• May’s “outside MONTH down” (higher high, lower low and lower close than Apr’s range and close), amidst
• a historically frothy 88% reading in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC.

These peak/reversal conditions were basically the opposite of those that warned of and accompanied Nov’22’s major bottom and reversal.

So what does this all mean heading forward?  The intermediate-to-longer-term trend is down and is expected to continue.  The extent of this downtrend is indeterminable and potentially severe BUT within the bounds of the three-year range of 2089-to-1618.  To even defer, let alone threaten this bearish call, the market needs to satisfy our three key reversal requirements of:

1. a countering bullish divergence in momentum of a scale sufficient to threaten the 5-month downtrend
2. proof of trendy, impulsive 5-wave behavior up, and, most importantly,
3. proof of 3-wave corrective behavior on a subsequent relapse attempt.

These requirements may unfold around the middle of the three-year range around the 1800-area or not until its lower-quarter below 1750.  Additionally, this market remains totally influenced not by inflation or Russia or China, but by its inverse relationship with the USD (or positive correlation with the euro, British pound and the yen).  And these currencies have been and remain in major reversals of their 2022 – 2023 rallies with NO end in sight currently.

These issues considered, a bearish policy and exposure remain advised with a recovery above at least 1933.1 and preferably 1968.9 required to pare or neutralize exposure.  Against this broader bearish backdrop, recovery attempts are advised to first be approached as corrective selling opportunities ahead of further and potentially extreme losses with former 1900-to-1920-area support considered new and formidable resistance.