T-Note "Breakout", S-T S&P Fib Failure Define New, Acute Risk Levels | RJO Futures

April 4, 2017 8:37AM CDT

JUN 10-Yr T-NOTES

Yesterday afternoon's break above not only last week's 124.295 high but also 24-Feb's key 125.045 high leaves Fri's 124.075 low in its wake as arguably one of the most important technical levels and conditions across the entire financial sector.  For this is THE latest smaller-degree corrective low this market now needs to sustain gains above to expose a larger-degree correction or reversal higher.  If, as we subjectively suspect, the past 3-week rally is the completing salvo to a major BEAR market correction, 124.07 is the objective gateway to that bearish count.

The ramifications of either count are not only scope-of-move for T-notes, but also the Eurodollar complex, the S&P 500 and most of the other key financial commodity markets.  We will address a similar, threatening technical construct in Dec17 Eurodollars and an inverted threat in the S&P 500 below.

10 yr Treasury 240 min Chart

IF something broader to the bull side has been exposed, then former 125.04-to-124.29-range resistance shown in the 240-min chart above would now be expected to hold as new support.  However, a failure below 124.07 is the key to mitigating any broader bullish count and resurrecting a major bearish one.

The daily close-only chart below shows the trendy, impulsive nature of the past three weeks' rally that could be either the completing C-Wave of a broader bear market correction or the 3rd-Wave of a more significant correction or reversal higher.  To this point the recovery attempt from 16Dec16's 122.105 low close is only a 3-wave affair that can easily be construed as a textbook corrective structure.  But now that the market has exposed the longer-term trend as up, EVERYTHING hinges on whether or not this market can simply SUSTAIN gains above Fri's 124.075 intra-day low and/or Thur's 124.11 close.

10 yr Treasury Daily Chart

The weekly chart below shows the market's 4-month acknowledgement of the lower-122-handle as a key support condition.  On the heels of 2016's collapse however and as introduced in 30Dec16's Technical Blog, we still advise longer-term players to approach recovery attempts as likely corrections within a new secular bear market in T-note prices.  For the time being however and while the market sustains gains above 124.07, further lateral-to-higher prices remain expected.

10 yr Treasury Weekly Chart

Broker Daily Chart

Looking at 10-yr yields, the daily log close-only chart above shows the market has yet to break 240Feb's 2.30% low and Fibonacci minimum 23.6% retrace of a suspected 3rd-Wave rally from 27Sep16's 1.555% low to 15Dec16's 2.60% high.  This 4-month, shallow (thus far) counter to last year's major rate jump would seem to underscore the longer-term strength of the trend.  A break below 2.30% provides the market the opportunity to threaten or negate a count calling for a longer-term rate rise.

The analogous short-term risk parameter to our 124.07 level in the contract is 28-Mar's 2.42% minor corrective high in rates.  A recovery above 2.42% would provide the first reinforcing evidence of a resumption of the broader trend higher in rates.  By the same token however a clear break below the obviously pivotal 2.30% low for the past four months gives the bull the chance to drive rates potentially sharply lower.

These issues considered, a cautious bullish policy remains advised with a failure below 124.07 required to not only threaten this count and warrant its cover, but resurrect the secular bear trend to eventual new lows below 122.00.  While the market remains above 124.07 further and possibly accelerated gains should not surprise with former 125.04-to-124.19-range resistance considered new near-term support.

Broker Weekly Chart

 

DEC17 EURODOLLARS

Yesterday's break above last week's 98.48 highs and resistance reaffirms the intermediate-term uptrend and leaves Fri's 98.425 low in its wake as the latest smaller-degree corrective low it now needs to sustain gains above to maintain a more immediate bullish count.  In this regard 98.42 is considered our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed by shorter-term traders with tighter risk profiles.

Euro Index 240 min Chart

Euro Index Daily Chart

The daily chart above shows the market's encroachment on 08-Feb's 98.555 next larger-degree corrective high and our key risk parameter the market needs to recoup to, in fact, break the major downtrend from last Jul's 99.235 high.  The combination of:

  • clearly waning downside momentum on a WEEKLY close-only basis below
  • historically bearish levels in our RJO Bullish Sentiment Index that haven't been seen in 22 YEARS and
  • an arguably complete 5-wave Elliott sequence down from last year's high

is a unique and compelling one that warns of a larger-degree correction or reversal higher if this market cannot sustain Feb-Mar losses below 98.56.

These issues considered, shorter-term traders are advised to move to a cautious bullish policy on setback attempts to former resistance-turned-support at 98.48 with a failure below 98.425 negating this call.  Longer-term players are advised to pare bearish exposure to more conservative levels and jettison the position altogether on the immediate break above 98.555.

Euro Index Weekly Chart

 

JUN E-MINI S&P 500

Against the backdrop of relatively constructive technicals in T-notes and Eurodollars and considering a relatively inverse correlation of late between the interest rate markets and the S&P, the combination of an admittedly short-term bearish divergence in momentum yesterday morning below 2348 and the market's rejection of the exact (2367) 61.8% retrace of Mar's 2397 - 2318 presents a compelling case for last Thur's 2367 high as a tight but objective risk parameter from which a cautious bearish policy can be effectively based and managed.

It remains notable that 27-Mar's 2318 low and support remains intact as a key level the market needs to break to mitigate a bullish count that contends that the sell-off attempt from 01-Mar's 2397 high to that 2318 low is a clear 3-wave and thus corrective structure consistent with a long-term bullish count.  Per such we are considering 2317 as our new key longer-term risk parameter around which longer-term players are advised to rebase and manage the risk of a still-advised bullish policy.  In effect we believe the market has identified 2367 and 2317 as the key directional triggers heading forward.

Emini 240 min Chart

Emini Daily Chart

Thus far the market has only retraced a Fibonacci minimum 23.6% of Nov-Mar's 2079 - 2401 rally that would seem to underscore its strength.  A failure below 27-Mar's 2318 low however could expose relatively sharp losses given the extent and uninterrupted nature of Nov-Mar's rally.  This said, the MAGNITUDE of the secular bull market is such that even a 100-to-150-pt setback would still fall well within the bounds of a mere bull market correction.  Indeed, on such a major scale as that shown in the weekly log chart below, a failure below 04Nov16's 2079 remains required to truly threaten the secular bull market.  The former 2100-handle that provided a resistant cap for nearly two years serves as a major new support candidate.

Emini Weekly Chart

These issues considered, shorter-term traders are OK to consider cautious bearish exposure from current 2346-area levels with strength above 2367 negating this call.  Longer-term players remain advised to maintain a bullish policy with a failure below 2317 required to move to the sidelines in order to circumvent the depths unknown of a larger-degree correction lower.

Emini Monthly Chart

 

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