Suspected T-Note, Eurodollar Corrections Expected to Yield to Broader 2017 Recoveries | RJO Futures

May 30, 2017 9:41AM CDT

SEP 10-Yr T-NOTES

The extent of the market's recovery the past half-week relative to 23-May's 126.01 minor corrective high is sufficient to render the sell-off attempt from 18-May's 126.13 high to last week's 125.145 low a 3-wave affair as labeled in the 240-min chart of the now-prompt Sep contract below. Left unaltered by resumed weakness below 125.145 this 3-wave setback is considered a corrective/consolidative event that warns of a resumption of the uptrend that preceded it. Per such 125.14 is considered our new key risk parameter from which a cautious bullish policy can be objectively rebased and managed ahead of a run at and potential breakout above 18-May's 126.13 high. Once beyond the 126.00-area around which this market has pivoted the past week-and-a-half, we will expect it to be a source of new support from which subsequent gains and a bullish policy can be effective based and managed.

10 yr Treasury 240 min Chart

10 yr Treasury Daily Chart

Admittedly, this 125.14 level is very tight for a "longer-term" risk parameter, but we believe the market's proximity to the extreme upper recesses of the past month-and-a-half's range shown in the daily close-only chart above warrants such a more conservative approach to risk assumption until the market confirms the broader bull with a clear and decisive break-out above the 126.06-area resistant cap.

Traders are reminded that from an even longer-term perspective shown in the weekly log scale chart below the past five months' recovery from 15Dec16's 122.145 low is arguably a bear market correction coming on the heels of last year's meltdown. These issues considered, longer-term traders remain advised to maintain a bullish policy and exposure with a failure below 125.14 required to threaten this call enough to warrant moving to the sidelines if not a cautious bearish policy. Shorter-term traders whipsawed out of bullish exposure following 19-May's bearish divergence in short-term mo discussed in that day's Technical Blog are advised to return to a cautious bullish policy from current 126.01 levels OB with a failure below 125.14 required to cover the trade.

10 yr Treasury Weekly Chart

 

JUN18 EURODOLLARS

Euro Index 240 min Chart

 

Against the backdrop of the broader recovery shown in the daily chart below, the recent sell-off attempt from 18-May's 98.515 high to last week's 98.395 low is considered a 3-wave and thus corrective affair as labeled in the 240-min chart above. The Fibonacci fact that this setback stalled at the exact (98.395) 50% retrace of early-May's preceding 98.275 - 98.515 rally would seem to reinforce this bullish count and call for a run at and potentially through that 98.515 high. In this regard last week's 98.395 low is considered our new short-term risk parameter from which a still-advised bullish policy and exposure can be objectively rebased and managed by shorter-term traders with tighter risk profiles.

Euro Index Daily Chart

From a long-term perspective traders are reminded that this market is still afflicted by the trifecta of base/reversal-threat factors:

  • a confirmed bullish divergence in WEEKLY momentum amidst
  • historically bearish sentiment not seen in 22 YEARS and
  • an arguably complete 5-wave Elliott sequence down from Jul'16's 99.12 high weekly close.

We continue to believe that the 2016-17 decline is just the INITIAL 1st-Wave of a new secular bear market that could span a generation. But as a result of these factors listed above the market is now vulnerable to a not unexpected (2nd-Wave) correction of last year's decline that could be extensive in terms of both price and time.

These issues considered, a bullish policy remains advised with weakness below 98.39 required for shorter-term traders to move to the sidelines and commensurately larger-degree weakness below 09-May's 98.275 low and key risk parameter required for long-term players to do the same. In lieu of such weakness we anticipate a resumption of the past couple months' recovery to eventual new highs above 98.52.

Euro Index Weekly Chart

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

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.