Overnight’s break above Tue’s 3.8450 high reaffirms the major uptrend and leaves yesterday’s 3.7940 low in its wake as the latest smaller-degree corrective low this market is now minimally required to fail below to even defer, let alone threaten the bull. Per such, this 3.7940 level serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a still-advised bullish policy and exposure.
Now-former 2.8450-area resistance would be expected to hold as new near-term support.
On a broader scale, the magnitude of this major bull trend is clear in the weekly chart below. Commensurately larger-degree weakness below 28-Jan’s 3.4910 next larger-degree corrective low and key long-term risk parameter remains clearly required to confirm a bearish divergence in momentum of a WEEKLY scale sufficient to break the major bull from last Mar’s 1.9725 low.
Are historically frothy bullish sentiment levels and the prospect that the market’s in the late stages of a compelling 5-wave Elliott sequence from last year’s low reasons to be more watchful for a major peak/reversal threat? Absolutely. HOWEVER, none of these compelling prospects/threats matter at all until and unless the market breaks the clear and resent and major uptrend. Such a break will start, minimally, with a failure below 3.7940, but it’s crucial to acknowledge that such smaller-degree weakness is of an insufficient SCALE to conclude a larger-degree top. Subsequent and commensurately larger-degree weakness below 3.4910 is required to break the bull and render what then would be technically confirmed facts typical of major peak/reversal environments. Until such weakness is proven, the trend remains up on all scales and should not surprise by its continuance.
On an even broader monthly basis below, the market proximity to the upper-quarter of its massive historical lateral range is yet another threat to the bull and will absolutely contribute to a list of peak/reversal factors once a failure below 3.4910 is confirmed. Until then, there’s no way to know how high “high” is and whether the bull won’t break 2011’s 4.65 all-time high.
These issues considered, a bullish policy and exposure remain advised with a failure below 3.7940 required for shorter-term traders to take profits and move to the sidelines. Commensurately larger-degree weakness below 3.4910 is required for longer-term commercial players to follow suit. This said, longer-term players also have the opportunity to pare exposure to more conservative levels on a failure below 3.7940 and exchange whipsaw risk (back above whatever high is left in the wake of that sub-3.7940 failure) for much deeper nominal risk below 3.4910. In lieu of weakness below at least 3.7940, the trend is up on all scales and should not surprise by its continuance or acceleration.
