S-T Mo Failure Stems Euro Bull, Not Enough to Conclude Top | RJO Futures

March 30, 2017 8:36AM CDT


The market's failure yesterday below our short-term risk parameter at 1.0760 identified in Mon's Technical Blog confirms Mon's 1.0906 high as one of developing importance and the end to the rally from 22-Feb's 1.0493 low.  As a result that 1.0906 high serves as our new short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed.

Euro Index 240 min Chart

Euro Index Daily Chart

Against the backdrop of our broader BASE/reversal-threat count however, yesterday's shorter-term mo failure is of an insufficient scale to conclude Mon's high completed a 3-wave and thus corrective event from 03-Jan's 1.0341 low shown in the daily log scale chart above.  TO THIS POINT the recovery from Jan's 1.0341 low is clearly only a 3-wave affair that certainly could be a correction ahead of a resumption of the secular bear trend.  And for those who want to get an early leg up on such a count, Mon's 1.0906 high provides a specific and objective risk parameter to any such bearish punts.  But commensurately larger-degree proof of weakness below 22-Feb's next larger-degree corrective low and key risk parameter at 1.0493 remains required to, in fact, confirm this quarter's recovery attempt as a 3-wave and thus corrective affair ahead of a resumption of the secular bear to new lows below 1.0341.

Traders are reminded of the factors on which a major base/reversal count are predicated:

  • a confirmed bullish divergence in WEEKLY momentum
  • the market's gross failure to sustain Dec'16 losses below the past two years' 1.04-handle-area support
  • an arguably complete 5-wave Elliott sequence down from May'16's 1.1617 high and, perhaps most indictingly,
  • historically bearish levels of market sentiment.

Euro Index Weekly Chart

It's also interesting to point out that the resumption of the secular bear trend from May'14's 1.3993 high came within 2/10ths of a cent of its (1.0360) 1.000 progression of Jul'08 - Jun'10's 1.6040 - 1.1876 decline on a monthly log scale basis below.  Granted, on this massive scale a recovery above May'16's major 1.1617 corrective high and very long-term risk parameter remains required to confirm the break of the 8-1/2-year secular bear market from Jul'08's 1.6040 high.  but all major reversal gotta walk before they can run, and we believe that this week's break above 02-Feb's 1.0829 initial counter-trend high is a reinforcing step within just such a major base/reversal count.  And if it's not, all the market has to do is fail below 1.0493.

These issues considered, shorter-term traders with tighter risk profiles have been advised to move to a neutral/sideline position as a result of yesterday's bearish divergence in short-term mo.  Strength above 1.0906 is required to negate this call, reinstate the developing base/reversal count and expose potentially sharp gains thereafter.  We will be watchful for a countering bullish divergence in short-term momentum from the 1.0700-area (+ or -) needed to define a more reliable low from which to re-establish bullish exposure.  Longer-term players remain advised to maintain a bullish policy with weakness below 1.0493 required to negate this call and warrant its cover.

Euro Index Monthly Chart



The technical construct and expectations for the USD Index are virtually identical to those detailed above in the Euro, only inverted, with Mon's 98.85 low considered our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively base non-bearish decisions like short-covers and cautious bullish punts.  Commensurately larger-degree strength above 02-Mar's 102.26 larger-degree corrective high and key long-term risk parameter remains required to negate our long-term peak/reversal count and re-expose the secular bull to new highs above 103.82.

Dollar Index 240 min Chart

Dollar Index Daily Chart

Dollar Index Weekly Chart

Dollar Index Quarterly Chart


RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.