Top in T-Notes??? | RJO Futures

May 4, 2017 9:27AM CDT

This morning's break below 24-Apr's 125.065 low and area that has supported the market for the past week-and-a-half confirms AT LEAST the intermediate-term trend as down and leaves the 125.275 upper boundary to the recent range as the level this market has got to now recoup to break the slide and expose the sell-off attempt from 18-Apr's 126.20 high a 3-wave and thus corrective event consistent with a broader bullish count.    In this regard 125.28 is considered our new short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.

10 yr Treasury 240 min Chart

10 yr Treasury Daily Chart

CRITICALLY and opportunistically, this admitted short-term weakness could be a subset of a larger-degree PEAK/reversal process that contends that 18-Apr's 126.20 intra-day high and 126.165 high close COMPLETED a major bear market correction from 16Dec16's 122.105 low shown in the daily close-only chart above.  Today's break below 25-Apr's 125.13 initial counter-trend low confirms a bearish divergence in momentum that defines 18-Apr's 126.165 high as the END of not only the rally from 13-Mar's 122.255 low, but also the current top to what is only a 3-wave recovery from Dec's 122.105 low.  Left unaltered by a recovery above 126.17 and our new long-term risk parameter, this 3-wave Dec-Apr recovery is arguably a complete correction ahead of a resumption of 2016's collapse that preceded it.

Reinforcing this bearish view on T-note prices is the past couple days' recovery above former 2.30%-to-2.33%-area support-turned-resistance in actual 10-yr yields shown in the daily log close-only chart below.  Combined with the Fibonacci fact that Mar-Apr's rate decline spanned a length exactly 1.618-times that of Dec-Feb's preceding 2.60%-to-2.30% slide, we believe this bullish divergence in rate momentum identifies 18-Apr's 2.16% low as the END or lower boundary to a correction within what we believe is a new secular move higher in 10-yr rates.

Broker Daily Chart

The weekly chart of the contract below shows 1) the understandable bounce from key 122-handle-area support and 2) the relatively minor (not even a Fib minimum 38.2% retrace) and labored recovery attempt from the Dec low that is still advised to first be approached as a corrective/consolidative structure on the heels of last year's collapse.

These issues considered, traders are advised to move from a neutral-to-cautiously-bullish stance to a new cautious bearish stance from current 125.05-area prices OB, with strength above 125.28 required for shorter-term traders to step aside and subsequent strength above 126.230 required for long-0term players to move to the sidelines.  In lieu of such strength further and possibly steep losses are expected as the secular bear market in T-notes may now be poised to resume after a 4-month correction.

10 yr Treasury Weekly Chart

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