Cable Failure From Range Cap Re-exposes Bear | RJO Futures

February 7, 2017 8:24AM CST

In Thur's Technical Blog we identified 31-Jan's 1.2412 corrective low as our short-term risk parameter the market needed to sustain gains above to maintain a more immediate bullish count.  Its failure overnight to do this confirms a bearish divergence in momentum that defines Thur's 1.2707 high as the END of the rally from 15-Jan's 1.1988 high and new short-term risk parameter from which to navigate EITHER a mere correction of this 1.1988 - 1.2707 pop within a broader base/reversal count OR a resumption of the secular bear trend to new lows below 1.1988.

GB Pound 240 min Chart

Since 15-Dec's momentum failure discussed in that day's Technical Webcast, 06-Dec's 1.2776 high, 50% retrace of Sep-Oct's 1.3446 - 1.2090 decline and area of former support-turned-resistance has been acknowledged as a key larger-degree corrective high and risk parameter this market needs to recover above to threaten the secular bear trend and expose a base/reversal count that could be major in scope.  Overnight's confirmed bearish divergence in momentum just shy of this thresholds reinforces it as a key technical condition around which longer-term directional biases and exposure can be objectively toggled.

IF the recent recovery from 15-Jan's 1.1988 low to last week's 1.2707 high is the initial A- or 1st-Wave of a larger-degree correction or reversal higher, then it is imperative that the market survive the current relapse attempt as a 3-wave, labored correction with a bullish divergence in short-term momentum from some level north of 1.1988.  Until and unless such requirements are met, a crash-&-burn resumption of the secular bear market to levels potentially well below 1.1988 should hardly come as a surprise given the market's textbook mo failure from the resistant upper recesses of a well-established range.

GB Pound Daily Chart

GB Pound Weekly Chart

On a weekly log close-only basis above, waning downside momentum, historically bearish levels of market sentiment and the prospect of a "double-bottom" pattern provide elements typical of major base/reversal environments.  On the other hand the market's shallow and lateral chop since 28-Oct's 1.2186 low weekly close can easily be considered a mere corrective bear-flag consolidation ahead of a resumption of the secular bear market.

To be sure, the secular bear market shown in the monthly log scale chart below is massive and will require a bullish divergence in commensurately larger-degree momentum to threaten it.  The past four months' lateral chop is NOT enough to conclude the bear's end.  MINIMALLY, a clear and decisive punch above 06-Dec's 1.2776 high remains required to expose a sea change.

In sum and in light of overnight's mo failure below 1.2412, shorter-term traders have been advised to neutralize recent cautious bullish exposure and are next advised to first approach intra-range rebound attempts to the 1.2550-area OB as corrective selling opportunities with strength above 1.2707 negating this call.  Longer-term players remain advised to maintain a bearish stance with strength above 1.2776 required to reverse into a cautious bullish policy.  We believe a resumption of the secular bear trend to new lows below 1.1988 may lie ahead, but we will be watchful for a bullish divergence in short-term mo from levels below about 1.2250 that might resurrect a base/reversal threat.

GB Pound Monthly Chart

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