New S-T Risk Levels Defined in Rates, Currencies & Precious Metals

November 25, 2016 3:29AM CST

The dominant trends down in T-notes, Eurodollars, gold and silver and up in the USD remain well entrenched with current prices far removed from our long-term risk parameters that remain intact across this spectrum.  The only things that have changed from our recent updates in each are the short-term corrective highs and lows that serve as our shorter-term risk parameters for shorter-term traders with tighter risk profiles.  Below we provide quick summaries of each of these seven markets and their new short-term risk levels from which shorter-term traders can objectively rebase and manage the risk of their recommended exposure.

DEC 10-Yr NOTES

10 yr Treasury Daily

Within the dominant long-term downtrend shown in the daily close-only chart above, the 240-min chart below shows a slowdown in the rate of decline over the past couple weeks.  Despite this slowdown that MAY be a warning of an impending corrective rebound, the trend remains, in fact, down.  ONLY the market's recovery above 22-Nov's 125.31 latest smaller-degree corrective high and new short-term risk parameter will CONFIRM a bullish divergence in momentum to the point of non-bearish action like short-covers and cautious bullish punts.

Per such and in sum, a bearish policy and exposure remain advised with strength above 126.00 required for shorter-term traders to move to the sidelines and longer-term players to perhaps pare bearish exposure to more conservative levels to reduce some of the risk of an interim corrective rebound.  Ultimately given the magnitude of the major developing downtrend, strength above 04-Nov's 130.12 orthodox high and key long-term risk parameter remains required to negate our long-term bearish count calling for a "generational move" higher in Treasury rates.

10 yr Treasury 240 min

DEC17 EURODOLLARS

Euro Index Daily

Having broken the lower boundary of this year's major range shown in the daily chart above, the new long-term trend in Dec17 Eurodollar prices is down.  03-Nov's 98.94 orthodox high remains intact as our long-term risk parameter this market has to recoup to negate our long-term bearish count calling for a paradigm shift lower in prices (higher in rates) that we believe could span a generation.

From a short-term perspective and as a direct result of the past couple days' continued losses below last Fri's 98.60 low, the 240-min chart below shows that the market has identified Tue's 98.655 high as the latest smaller-degree corrective high and new short-term risk parameter it is now MINIMALLY required to recoup to confirm a bullish divergence in short-term momentum and expose what we suspect would be just an interim corrective hiccup.  In lieu of such 98.66+ strength the trend remains down on all scales and should not surprise by its continuance or acceleration with former 98.60-area support considered new neat-term resistance.

Euro Index 240 min

Euro Index Weekly

We would also remind traders that 11-Nov's weekly close below 20-May's 98.76 corrective low close confirms a bearish divergence in WEEKLY momentum (above) that warns that Jul's 99.16 high may have COMPLETED A MAJOR 5-WAVE ELLIOTT SEQUENCE UP from Sep'13's 96.23 low.  Such a count calls for a reversal lower that could be major or even generational in scope.  The next major technical hurdle in this short end of the curve is about 40 bps lower around the 98.43-area that capped this market as major resistance in Dec 2012 that, once broken in Aug'15 has thus far held as major new support.  A break of this area could be the coup de gras for a bull market that has been intact for 35 years.

In sum, a bearish policy remains advised with minimum strength above 98.66 required to pare or neutralize bearish exposure commensurate with one's personal risk profile.

Euro Index Monthly

USD INDEX

Dollar Index Daily

Yesterday's 102.05 high in the Index was the highest level this market has attained since the secular bull market began 8-1/2-years ago in Mar 2008, so obviously the trend is up on all scales and is expected to continue.  On a very shorter-term basis shown in the 240-min chart below, Wed's break above last Fri's 101.48 high leaves Tue's 100.65 low in its wake as the latest smaller-degree corrective low and new short-term risk parameter this market is now minimally required to fail below to even defer, let alone threaten the clear and present uptrend.  Per such this 100.65 low becomes our new short-term risk parameter to which shorter-term traders with tighter risk profiles can objectively trail protective sell-stops on a still-advised bullish policy.  In lieu of weakness below at least 100.65, the trend remains up on all scales and is expected to continue.

Dollar Index 240 min

EURUSD

Euro Index Daily

An equal but inverted technical picture to the USD Index above applies to the Euro with Tue's 1.0658 minor corrective high considered our new short-term risk parameter this market is now minimally required to recoup to confirm a bullish divergence in short-term mo and expose an interim corrective rebound.  Per such 1.0658 becomes our new short-term parameter from which shorter-term traders can objectively rebase and manage the risk of a still-advised bearish policy.

Euro Index 240 min

This very tight but objective risk parameter could come in handy given the market's proximity to the extreme lower recesses of the 1.0462 - 1.1712-range that has dominated price action since Mar'15 shown in the weekly log chart below.  If there's a time and place for the Euro to mount even an interim intra-range corrective rebound, it is here and now.  And the first sign of such would be on a recovery above 1.0658 that would stem the bear, even temporarily, and define a more reliable low from which any non-bearish decisions like short-covers and cautious bearish punts can only then be objectively based and managed.  In lieu of at least such 1.0658+ strength the trend remains down on all scales and is expected to continue and perhaps accelerate, so a bearish policy remains advised with strength above 1.0658 required to take defensive measures.

Euro Index Weekly

USDJPY

Japan Weekly

The weekly log scale chart above and daily chart below show the magnitude of the major reversal from Jun'15's 125.86 high to this year's 16-Aug 99.54 low.  The USD uptrend is clear and present and dominant and should be expected to continue on any reasonable scale.  Weakness below former 105.50-area resistance-turned-support is required to negate a long-term bullish count.

Japan Daily

On a short-term basis the 240-min chart below shows Mon afternoon's 110.26 low as the latest smaller-degree corrective low and new short-term risk parameter. This is the minimum level this market needs to fail below to even defer, let alone threaten a bullish count and warrant defensive measures by shorter-term traders.  In sum a bullish policy remains advised with 110.26 and 105.50 considered our new short- and long-term risk parameters.

Japan 240

DEC GOLD

Gold Daily

The typical inverse correlation between the USD and the price of gold has been on display this year with the daily log scale chart above showing the past quarter's downtrend about as dominant as the past quarter's uptrend in the USD.  02-Nov's 1309.1 orthodox high to the correction from 07-Oct's 1243 low serves as our long-term risk parameter the market needs to recoup to resuscitate a nearly year-long base/reversal environment.

From a shorter-term perspective the 240-min chart below shows that by virtue of Wed's continuation of this developing downtrend the market has identified Tue's 1220.9 high as the latest smaller-degree corrective high it is now minimally required to recoup to stem the slide and expose what we suspect would be just a slightly larger-degree correction within the overall downtrend.  Per such, shorter-term traders are advised to use 1221 as our new short-term risk parameter from which a still-advised bearish policy can be objectively rebased and managed.  Former 1205-area support is considered new near-term resistance.

Gold 240

DEC SILVER

Silver Daily

The technical construct for silver is virtually identical to that detailed above for gold with Tue's 16.885 minor corrective high considered our new short-term risk parameter from which shorter-term traders can objectively rebase and manage the risk of a still-advised bearish policy and exposure.  In lieu of at least such 16.885+ strength is proven, the trend remains down on all practical scales and should not surprise by its continuance or acceleration with former 16.50-area support considered new near-term resistance.

Silver 240

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.