S&P, 10-Yr T-Note Corrections Continue, Define New S-T Risk Levels | RJO Futures

March 27, 2017 8:24AM CDT


Overnight's break below last week's 2332 low reaffirms the developing correction and leaves last Thur's 2356 high in its wake as the latest smaller-degree corrective this market now needs to sustain losses below to maintain this interim bearish count.  In this regard 2356 is considered our new short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed by shorter-term traders with tighter risk profiles.  Former 2333-to-2338-area support is considered new near-term resistance ahead of further lateral-to-lower prices.

Emini 240 min Chart

Emini Daily Chart

From a longer-term perspective however this month's setback attempt remains of a scale grossly insufficient to conclude anything more than an interim correction within the secular advance.  Indeed, a failure below our longer-term risk parameter identified by 31-Jan's 2262 larger-degree corrective low remains minimally required to break even the uptrend from 04Nov16's 2079 orthodox low, let alone threaten the secular bull market.  The daily log scale chart above shows that the market has thus far retraced only a Fibonacci minimum 23.6% of the rally from that Nov low, with the 38.2% retrace cutting across at 2272.

Even if this month's correction evolves into a larger-degree threat with a break below our longer-term risk parameter at 2262, it would remain above the prior TWO YEARS' resistance around the 2100-area shown in the weekly log chart below that is considered a huge new support candidate.  These issues considered, a cautious bearish policy and exposure remain advised for shorter-term traders with a recovery above 2356 required to negate this call, warrant its cover and re-expose the secular bull market to new all-time highs.  Longer-term players remain advised to first approach this month;s setback as another corrective buying opportunity with a failure below 2262 required to defer or threaten this call enough to warrant moving to a neutral/sideline position.

Emini Weekly Chart



The correlation recently between the S&P 500 and 10-yr T-Note market has been a relatively negative one, so it comes as little surprise that continued slippage in the S&P has been accompanied by a continued rebound in T-notes.  Overnight's break above last week's 124.23 high reaffirms this month's rebound and leaves Thur's 124.06 low in its wake as the latest smaller-degree corrective low and new short-term risk parameter the market needs to sustain gains above to avoid confirming a bearish divergence in momentum that would stem the rally and expose at least another intra-range relapse.  This tight but objective risk parameter may come in handy given the market's proximity to the extreme upper recesses of the past quarter's range.

10 yr Treasury 240 min Chart

10 yr Treasury Daily Chart

The daily close-only charts of the Jun contract (above) and 10-yr yields (below) show the market's positions relative to recent key resistance around 125.03 and support at 2.30%.  If there's a time and place for the contract to peak out and reaffirm the recovery attempt from mid-Dec's low as a major BEAR MARKET correction, it is from this lower-125-handle-area. 

It's important to understand that this bear market correction could easily BREAK ABOVE the late-Feb resistance (below 2.30%) and remain intact as an ultimately bearish event.  While the market is maintaining AT LEAST an intermediate-term uptrend however, we never, ever want to fade a trend because of some theoretical or subjective wave count.  Herein lies the importance of identifying a tight but objective risk parameter like 124.06.

Broker Daily Chart

The weekly chart of the contract below shows the market still acknowledging major support from the 122-handle that dates from Sep 2013.  On the heels of the second-half of last year's collapse however, this not-unexpected bounce from Dec's 122.145 low is advised to first be approached as a mere corrective/consolidative event ahead of an eventual resumption of what we believe is a new secular bear market in Treasuries.  Per such a count we will be watching closely for a bearish divergence in momentum from the anywhere between spot (124-3/4; 2.35%) and the upper-125-handle (2.20%) needed to arrest the current uptrend and possibly the entire past quarter's correction and define a more reliable high and resistance from which the risk of a resumed bearish policy can be objectively rebased and managed.  In lieu of such a mo failure below at least 124.06 currently, further lateral-to-higher prices remain expected.  A break above 24-Feb's 125.045 intra-day high could expose accelerated gains thereafter.

10 yr Treasury Weekly Chart


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