Rebound Renders Apr-May T-Note Setback Corrective, May Re-expose Broader Bull | RJO Futures

May 17, 2017 8:31AM CDT

JUN 10-Yr T-NOTES

Overnight's recovery above 03-May's 125.265 high and our long-term risk parameter discussed in Fri's Technical Blog not only reaffirms the past week's developing uptrend, it renders Apr-May's sell-off attempt a 3-wave and thus corrective affair that warns of a resumption of the broader recovery from Dec's 122.145 low.  Yesterday and today's gains above Mon's 125.205 high leaves yesterday's 125.09 low in its wake as the latest smaller-degree corrective low this market has now got to sustain gains above to maintain a more immediate bullish count.  In this regard 125.09 becomes our new short-term risk parameter from which any non-bearish decisions like short-covers and cautious bullish punts can be objectively rebased and managed.

10 yr Treasury 240 min Chart

10 yr Treasury Daily Chart

On a daily close-only basis, the chart above shows today's recovery above 28-Apr's 125.23 high that clearly exposes Apr-May's sell-off attempt from 126.165 to 124.26 as a 3-wave affair as labeled.  Left unaltered by a relapse below that 124.26 low close (below 124.23 on an intra-day basis), this 3-wave decline is considered a corrective/consolidative event that warns of a resumption of Mar-Apr's uptrend that preceded it.

On a daily log close-only basis below, 10-yr yields have yet to fail below their key risk parameter defined by 28-Apr's 2.26% corrective low needed to render Apr-May's rate rebound a 3-wave and thus corrective affair that would warn of a resumption of Mar-Apr's decline to eventual new lows below 2.16%.

 Broker Daily Chart

From a longer-term perspective shown in the weekly chart of the contract below, the 6-month recovery from 15Dec16's 122.145 low still falls well within the bounds of a BEAR market correction relative to Sep=Dec's 3rd-wave-type meltdown that preceded it.  Nonetheless, while the market sustains levels above at least our new short-term risk parameter at 125.09 and especially 11-May's 124.23 low and key longer-term risk parameter, traders are advised not to underestimate this market's re-exposed upside.

In sum, a cautious bullish policy is advised for both short- and longer-term traders with weakness below at least 125.09 required to take defensive action and subsequent weakness below 124.23 required to jettison the position altogether and prepare for a resurrected bearish count.  In lieu of such weakness further and possibly accelerated gains should not surprise.

10 yr Treasury Weekly Chart

 

JUN18 EURODOLLARS

Yesterday and overnight's continuation of the past week's rally leaves yesterday's 98.385 low in its wake as the latest smaller-degree corrective low the market is now expected to sustain gains above to maintain a more immediate bullish count.  Its failure to do so will confirm a bearish divergence in momentum, stem the rally and expose at least a steeper correction lower.  In this regard 98.38 becomes our new short-term risk parameter from which a bullish policy can be objectively rebased and managed.

Euro Index 240 min Chart

Euro Index Daily Chart

Starting with Fri's recovery above the pivotal 98.36 area and following subsequent gains above 18-Apr's 98.445 high, it is clear that Apr-May's sell-off attempt was just a correction within a correction or reversal of the major downtrend from last year's 24Jun16 high at 99.20 to 14-Mar's 98.05 low.  The unique combination of:

  • a confirmed bullish divergence in WEEKLY momentum amidst
  • historically bearish sentiment levels not seen in over 20 years and
  • an arguably complete 5-wave Elliott sequence down

is a powerful one that warns of a major correction or reversal higher.  With the past three days' strength resurrecting Mar-Apr's uptrend, further and possibly accelerated gains should not surprise.  Per such a bullish policy remains advised with weakness below at least 98.38 required to even defer, let alone threaten this call and warrant defensive measures.  We have identified a pair of Fibonacci progression and retracement relationships at 98.445 and 98.49, but until the market PROVES weakness below at least 98.38, these, like all merely derived technical levels, mean nothing.

Euro Index Weekly Chart

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