Further S&P Erosion Raises Odds for Larger-Degree Correction | RJO Futures

April 17, 2017 8:23AM CDT

06-Apr's failure below 2340 discussed in that day's Technical Blog rendered the preceding recovery attempt from 27-Mar's 2318 low to 05-Apr's 2375 high a 3-wave and thus corrective affair that exposed the resumption of Mar's slide that preceded it.  Last week's break below 07-Apr's 2337 low reaffirmed the developing intermediate-term slide and leaves 10-Apr's 2363 high in its wake as the latest smaller-degree corrective high the market needs to sustain losses below to maintain a more immediate bearish count.  In this regard 2364 is considered our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a cautious bearish policy.  Former 2340-area support is considered new near-term resistance.

Emini 240 min Chart

Emini Daily Chart

The daily log scale chart above shows the market having yet to break 27-Mar's intra-day low at 2318 that we had as our longer-term risk parameter.  But since the market broke initial counter-trend lows and support in the 2340-area on a daily log close-only basis below, we are considering last week's break as confirming a bearish divergence in daily momentum that identifies 01-Mar's 2393 high close (2401 intra-day high) as the END of the rally from 04Nov16's 2081 low and start of a larger-degree correction of this entire 2081 - 2393 4-month rally.  Per such 2393 (2401 on an intra-day basis) becomes our new long-term risk parameter from which longer-term players are advised to manage the risk of non-bullish decisions like long-covers and cautious bearish punts.

To show the magnitude of the dominant secular bull market, these daily charts show the market thus far only correcting a Fibonacci minimum 23.6% of Nov-Mar's rally.  But with bearish technical in the USD Index and still-developing bullish technicals in the 10-Yr T-Notes and Dec17 Eurodollars, we believe this S&P market has weakened enough to expose a larger-degree correction lower that could easily trade down to the 2272-area (38.2% ret) or lower. 

Emini Daily Chart

Emini Daily Chart

From a very long-term perspective traders are urged to keep any relapse within the context of the dominant secular bull market shown in the monthly log scale char5t below.  ON a weekly log scale basis above this market could easily drop to the 2250-area or lower and remain well within the context of a major bull market correction.  Again, to truly threaten the secular bull we believe this market has to fall below AT LEAST 04Nov16's 2079 corrective low.  Setback attempts shy of that market remain advised to first be approached as corrective buying opportunities by very long-term players.

These issues considered, shorter-term traders remain advised to maintain a cautious bearish policy with strength above 2364 required to negate this count.  Longer-term players are advised to neutralize all bearish exposure from current 2331-area prices OB in order to circumvent the depths unknown of a larger-degree correction lower.  Strength above 2364 is required to reconsider bullish exposure.  In lieu of such 2364+ strength further lateral-to-lower prices below 27-Mar's 2318 low are expected in a correction that could ultimately include some highly charged headline news.

Emini Monthly Chart

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