The 240-min chart below shows the market's rejection overnight of the lower recesses of the past couple weeks' range between 09-Jan's 3.098 low and last week's 3.513 high. On the heels of late-Dec/early-Jan's 5-wave impulsive decline however, we continue to view the past two weeks' lateral price action as merely corrective/consolidative ahead of an eventual resumption of the early-Jan's initial counter-trend slide that could produce surprising weakness in the weeks and even months ahead. A return to the upper recesses of this recent range around 3.51 or even a bit higher should not surprise while 09-Jan's 3.098 low and short-term risk parameter remains intact as support.
From a longer-term perspective we remain bearish following the unique and opportunistic combination of a confirmed bearish divergence in momentum following 03-Jan's failure below 20-Dec's 3.290 low and historically bullish sentiment. Indeed, the recent 74% reading in our proprietary RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC is the highest since that that warned of and accompanied Feb 2003's peak and sharp correction lower (shown in the monthly log chart bottom). Currently reflecting 259K Managed Money long positions to just 96K shorts, this indicator warns of a vulnerability to lower- and possibly sharply lower- levels as the market forces the capitulation of this long-&-wrong exposure.
The Fibonacci fact that 28-Dec's 3.902 high came with a nickel of the (3.85) 38.2% retrace of the secular 10-year bear from Dec'05's 15.78 high to Mar'16's 1.611 low on a monthly log scale basis below would seem to reinforce such a peak/reversal-threat environment. These issues considered, long-term players remain advised to maintain a bearish policy and first approach recovery attempts to the 3.500-area OB as corrective selling opportunities with a recovery above 3.902 required to negate this call. Shorter-term traders with tighter risk profiles remain OK to maintain a neutral-to-cautiously-bullish stance with a failure below 3.098 required to negate this call, reinstate the developing reversal and expose potentially sharp losses thereafter. We will be watchful for a bearish divergence in short-term mo from 3.40-area levels or higher for what could be an acute risk/reward opportunity from the bear side.