Posted on 10/27/2021 10:25:30 AM by Dave Toth
In 21-Oct’s Technical Blog we discussed some long-term comparisons of the past five months’ extraordinarily labored sell-off attempt to that that unfolded between Jun’11 and Jun’12 before that secular bull trend resumed. Today’s decisive, impulsive poke above 30-Sep’s 5.49 high is far from confirming the resumption of Apr’20 – May’21’s secular bull trend, but it certainly is another strike against a broader peak/reversal threat like that that stemmed from Aug’12’s high.
The important by-product of today’s continuation of the past couple weeks’ rally is the market’s definition of yesterday’s 5.33 low as the latest smaller-degree corrective low it now needs to sustain gains above to maintain a more immediate bullish count. Its failure to do so will confirm a bearish divergence in momentum, mitigate a more immediate bullish count and re-expose the 5-month pattern of lateral-to-lower prices that could even break 10-Sep’s key 4.97 low. Per such, this 5.33 level serves as our new short-term risk parameter from which both short- and longer-term traders can objectively rebase and manage the risk of at least some, if not all bullish exposure.
Former 5.49-area resistance would be expected to hold as new near-term support per any broader bullish count.
Stepping back, there is no question that the extent and impulsiveness of today’s relative bust-out above 5.49 reinforces the base/reversal count we speculated on in 15-Sep’s Technical Blog following that day’s bullish divergence in short-term momentum. The challenge and requirement now for bulls is for the market to continue to BEHAVE LIKE ONE with proof of sustained, trendy, impulsive behavior above prior corrective lows like 5.33. We strap this requirement on the bull and corresponding bullish policy due to the market’s mere return to deep within the middle-half bowels of the 5-month range where the odds of aimless whipsaw risk are considered higher. Indeed, the risk/reward metrics of initiating directional exposure from such range-center environs is poor, so it is imperative for the bull to keep on keepin’ on maintain and reinforce a bullish policy and exposure.
The weekly log chat of the Dec contract below reminds us of the extent to which the Managed Money community has its neck sticking out on the bull side. Such a skew is considered fuel for downside vulnerability if the market doesn’t maintain the simple trendy pattern of higher highs and higher lows. We will judge the bull’s performance by how well it now sustains gains above 5.33 specifically.
The monthly log scale chart below shows the past five months’ relapse and that from Jun’11-to-Jun’12 to which we’re comparing it. In that previous topping process, there were oodles of aimless whipsaw chop in 4Q11 and 1Q12 before the market spiked emotionally lower in May-Jun before whipsawing right back ahead of the secular bull’s resumption. IF the past couple weeks’ impressive but intra-range rally is one of these whips, then we will acknowledged such beginning with a failure below 5.33. Until and unless such sub-5.33 weakness is proven, and on the heels of 5-months of mere lateral, corrective chop, there’s no way to know the Apr’20 – May’21’s secular bull isn’t positioning to resume. But if this is the case, then the bull would be expected to BEHAVE LIKE ONE with sustained, trendy, impulsive price action higher straight away.
These issues considered, both short- and longer-term traders are advised to take the next step in a slightly more aggressive bullish policy and exposure with a failure below 5.33 required to defer or threaten this call enough to warrant a return to a neutral-to-cautiously-bullish stance until the market fails big time below 4.97. Until and unless such sub-5.33 weakness is proven, further and possibly accelerated gains should not surprise. Nor should aimless chop from the middle-half bowels of the 5-month range.
