S-T Mo Failure Near Cable Range Base Sufficient to Take Profits

December 30, 2016 2:33AM CST

After posting yet another new low Wed that left Mon's 1.2300 high in its wake as the latest smaller-degree corrective high and short-term risk parameter, the market's failure overnight to sustain losses below that corrective high has confirmed a bullish divergence in momentum as shown in the 240-min chart below.  This admittedly short-term mo failure has defined Wed's 1.2199 low as one of developing importance and our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.

Per this development traders are advised to take profits at-the-market on shorts from the 1.2700-area recommended in 07-Dec's Trading Strategies Blog .  We anticipate an interim (prospective 4th-Wave)correction ahead of the eventual resumption of the Dec downtrend to new lows below not only this week's 1.2199 low, but also 11-Oct's 1.2090 low.

GB Pound 240 min

GB Pound Daily

The market's position in the lower-quarter of the past quarter's 1.2090 - 1.2776-range shown in the daily chart above and weekly log close-only chart below contributes to at least an interim base/reversal-threat environment that could easily expose another intra-range corrective rebound.  In a nutshell the risk/reward merits of maintaining a bearish policy "down here" simply aren't there.

GB Pound Weekly

The monthly log scale chart below shows the massive nature of the secular bear market in sterling rates.  This bear is not likely to go away easily and will likely produce a very challenging and major base/reversal PROCESS that could take months or even quarters around which we'll be better able to navigate a subsequent reversal higher.  Today's bullish divergence in momentum is obviously of a scale insufficient to suggest anything more than another interim corrective hiccup ahead of an eventual resumption of the bear.  On a scale that matters, 06-Dec's 1.2776 larger-degree corrective high remains as our key risk parameter this market is MINIMALLY required to recoup to even threaten the secular bear, let alone reverse it.  Indeed, the monthly chart below shows the market working on an "outside month" (higher high, lower low and lower close than Nov's range and close) that would seem to reinforce a long-term bearish count.

In sum and while acknowledging the likelihood that the long-term downtrend remains intact, traders are nonetheless advised to take profits at-the-market on recommended shorts from 1.2700 ahead of a likely, if interim corrective rebound in the week or two ahead.  A relapse below Wed's 1.2199 low will nullify this call and re-expose the secular bear.

GB Pound Monthly

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