Intra-Range T-Note, Eurodollar Relapses Consistent with L-T Bear Counts

January 26, 2017 2:31AM CST

MAR 10-Yr T-NOTES

Yesterday and overnight's break below 20-Jan's 123.25 initial counter-trend low not only confirms at least the intermediate-term trend as down, it is consistent with our long-term bearish count discussed in 17-Jan's Technical Blog that contends the recovery from 15-Dec's 122.145 low is merely another correction ahead of eventual resumed losses below 122.14.  As a direct result of this resumed, if intra-range weakness, the 240-min chart below shows that the market has identified Mon's 124.315 high as the latest smaller-degree corrective high and new short-term risk parameter it is now required to sustain losses below to maintain a more immediate bearish count.  Its failure to do so would render the relapse from 17-Jan's 125.135 high a 3-wave and thus corrective affair that would warn of a resumption of a larger-degree (bear market) correction up from the Dec low.

10 yr Treasury 240 min

10 yr Treasury Daily

The fact that the market has yet to break Dec's 122.265 low close (122.145 intra-day low) shown in the daily close-only chart above maintains the possibility that the current relapse may only be an interim (B-Wave) correction of Dec-Jan's rally within a larger-degree corrective range that could have weeks of lateral chop yet ahead.  If this is the case, then we would expect this market to arrest the current intermediate-term slide with a confirmed bullish divergence in short-term momentum somewhere between the (123.185) 61.8% retrace of Dec-Jan's 122.145 - 125.135-rally detailed in the hourly chart (top) and the lower-recesses of the past month's range.  In lieu of such a short-term mo failure however, further and possibly accelerated losses and break of Dec's low should not surprise.

Basis actual 10-yr yields shown in the daily log close-only chart below, 15-Dec's 2.60% high remains intact as the obvious key high and risk parameter the market needs to break to reinstate what we believe is a new secular move higher in Treasury rates.

Broker Daily

Finally, the weekly chart of the contract below shows the market's respect thus far for the 122-handle that provided major support back in 2013.  As discussed for many months now, we believe this market to be in the very early throes of a reversal of the secular bull market in Treasuries that has spanned the past 35 years, exposing a new bear market (lower prices, higher rates) that could span the next generation.  This, obviously, calls for an eventual and major break below this 122-handle.  While 16-Dec's 122.145 low remains intact however, further lateral consolidation should not surprise.

In sum and while yesterday/today's relapse reinforces our long-term bearish count, the market's current position in the middle of the past month's 122.14 - 125.13-range presents a poor risk/reward situation from which to initiate directional exposure, so a neutral/sideline policy is advised for the time being.  Cautious bearish exposure is OK on an interim pop to the 124-1/4-to-1/2-range with protective buy-stops above 125.00.

10 yr Treasury Weekly

DEC17 EURODOLLARS

Similarly, the past few days' relapse highlights this month's key resistance from the 98.52/.53-area detailed in the 240-min chart below.  The market's position in the middle or the past month's range presents a poor risk/reward condition from which to initiate directional exposure, but longer-term traders remain OK to maintain a bearish policy with strength now above our 98.54 key risk parameter required to threaten this call enough to warrant moving to the sidelines.

Eurodollar 240 min

Eurodollar Daily

The market's ability to retrace only a Fibonacci minimum 23.6% of Nov-Dec's 98.925 - 98.385-portion of the broader downtrend on a daily close-only basis above would seem to underscore this market's overall weakness and vulnerability.  While the market remains above 15-Dec's 98.36 intra-day low it would be premature to conclude 17-Jan's 98.54 high as the END of the suspected bear market correction as opposed to just its upper boundary ahead of further lateral behavior.  But until and unless that 98.54 high and key risk parameter is broken, our longer-term bearish count remains intact and is expected to eventually produce new lows below 98.36.

Eurodollar Daily

Finally and from a very long-term perspective, the weekly close-only chart below shows the break of the major uptrend from AT LEAST Sep'13's 96.23 low that exposes a peak/reversal environment that could be major in scope.  In sum, a bearish policy remains advised with strength above 98.54 required to threaten this call enough to warrant its cover.  And while the past month's 98.54 - 98.36-range could continue to house aimless, lateral, corrective behavior for a few more weeks, the eventual break below 15-Dec's 98.36 low remains fully expected. Eurodollar Weekly

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