S&P Rebound Reinforces L-T Bullish Count; T-Note Bounce Still Considered Corrective

September 22, 2016 4:59AM CDT


The market's recovery yesterday and overnight above our short-term risk parameter defined by 12-Sep's 2156 high not only confirms at least the intermediate-term trend as up, it reinforces 12-Sep's 2100 low as the END or lower boundary to a correction from 23-Aug's 2192 all-time high ahead of an eventual resumption of the secular bull trend that preceded it.  As a direct result of today's continued gains the 240-min chart below shows that the market has identified yesterday's 2126 low and 12-Sep's pivotal 2100 low as new smaller- and larger-degree corrective low that can now be used as our new short- and long-term risk parameters to a resumed bullish policy.  The near-term challenge to such a policy however is the market's position at the upper-quarter of the past month's 2192 - 2100-range where the risk/reward merits of initiating bullish exposure are poor.

Emini 240

Emini Daily

Against the backdrop of the secular bull trend, we believe it is impressive that Aug-Sep's sell-off attempt stalled exactly where it probably should have as a suspected correction within the major bull.  Indeed, the importance of the 2105-to-2134-range that capped this market as resistance for more than a year held firm in its new role as support following early-Jul's break above it.  The weekly log scale chart below also shows the market rebounding from Fibonacci minimum 38.2% retracements in BOTH the Aug-Sep correction of Jun-Aug's 1981 - 2192 rally and Feb-Jun's 1802 - 2120 rally.

Such minimum Fib retraces would seem to underscore the strength and resiliency of the bull that should hardly surprise by its continuance.  This said, while 23-Aug's 2192 high remains intact as resistance, a bearish divergence in short-term mo from the upper-quarter of the 2192 - 2100-range would likely signal another intra-range relapse within the context of a broader bull market consolidation.

Emini Weekly

Finally, the monthly log scale chart below shows the magnitude of the secular uptrend that continues to warrant a bullish policy for long-term players.  On this massive scale a failure below at least 27-Jun's 1981 corrective low and preferably Feb's 1802 major corrective low remains required to threaten or break the long-term uptrend.

In sum, while the past couple days' recovery reinforces an ultimately bullish count that warns of an eventual resumption of the secular advance, the upper-quarter of Aug-Sep's 2192 - 2100-range presents a poor risk/reward condition from which to re-establish bullish exposure.  Rather, we advise waiting for either an upside breakout above 2192 and/or a return to the lower-quarter of this range to reconsider bullish exposure.  In the meantime a neutral/sideline position is advised.

Emini Monthly


Overnight's recovery above 15-Sep's 130.27 initial counter trend high exposes the new intermediate-term trend as up.  This rebound leaves yesterday's 130.02 low in its wake as one of developing importance and our new micro risk parameter from which any non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.  Against the backdrop of the past 2-1/2-months' developing downtrend however, it is easy to see the recovery attempt from 13-Sep's 129.26 low as a 3-wave and thus corrective affair until the market proves strength above 07-Sep's 131.18 corrective high and short-term risk parameter.

10 yr Treasury 240 min

10 yr Treasury Daily

The daily close-only chart of the contract above shows the sell-off from 05-Jul's 133.00 high thus far holding at a unique pair of Fibonacci retracement and progression relationships that we have discussed often.  However, in lieu of strength above at least 06-Sep's 131.115 high needed to break the simple downtrend, there's no reason to think the past week's recovery attempt isn't just another corrective hiccup similar to late-Aug/early-Sep's corrective and late-Jul's pop.

From a 10-yr RATE perspective shown in the daily log close-only chart below, we anticipated resistance from the 1.64%-to-1.75%-range that has thus far kept a lid on rates.  However, this chart also shows the trend as up with former 1.63%-area resistance considered new near-term support  A failure below 06-Sep's 1.53% corrective low remains required to break the uptrend is rates.  In lieu of such a rate relapse, setback attempts are advised to first be approached as corrections within an increasing rate environment.

Broker Daily

Finally, former 130-handle area resistance has thus far held as new support with 13-Sep's 129.26 intra-day low only 2/32s away from the 50% retrace of Nov'15 - Jul'16's 125.09 - 134.07 rally.  Per such it's not hard to consider a long-term BULLISH count being resurrected.  But in light of the past couple months' slide, strength above at least 06-Sep's 131.115 high remains required to indicate such.  In lieu of such strength traders remain advised to first approach recovery attempts like the past week's as corrective selling opportunities ahead of the eventual resumption of the past couple months' downtrend to eventual new lows below 129.30.

10 yr Treasury Weekly

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