Intra-Range S&P Rebound Reinforces Broader Bullish Count

May 9, 2018 8:09AM CDT

Overnight's recovery, as scant as it is, above 30-Apr's 2682 high and our short-term risk parameter discussed in Fri's Technical Blog renders the recent setback from 18-Apr's 719 high to Thur's 2591 low a 3-wave affair as labeled in the 240-min chart below. Left unaltered by a relapse below that 2591 low, this 3-wave decline is considered a corrective/consolidative event that warns of a resumption of early-Apr's 2552 - 2719-rally that preceded it. In this regard that 2591 low serves as our new short-term parameter from which the risk of non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.
E-mini S&P 500 240min Chart
E-mini S&P 500 Daily Chart
If there's a "but" to the bullish equation, it's the fact that the market has only returned to the middle-half bowels of the lateral range that has engulfed it since 29-Jan's 2879 high. Against the backdrop of the secular bull market shown in the weekly log scale chart below, this lateral chop is advised to first be approached as just a correction within the secular uptrend that's expected to resume. How long the market chops everyone up within this consolidation is anyone's guess. And to be sure, the middle-halves of such ranges are typically rife with aimless whipsaw risk and present poor risk/reward merits from which to initiate directional exposure.

A bullish policy and exposure remain advised for long-term players with a failure below at least last week's 2591 corrective low required to pare bullish exposure and subsequent weakness below 02-Apr's 2552 next larger-degree corrective low and key risk parameter required to threaten a bullish call enough to warrant moving to the sidelines to circumvent the depths unknown of a larger-degree correction or perhaps even a major peak/reversal environment. Until and unless such sub-2552 weakness is proven, the:

  • backdrop of the secular uptrend
  • fact that the past quarter's sell-off attempt failed to retrace even a Fibonacci minimum 38.2% of even Nov'16 - Jan'17's 2028 - 2879-portion of the bull AND, most importantly,
  • erosion in bullish sentiment to levels that have warned of and accompanied previous ENDS of corrections for YEARS

would seem to be consistent with a count calling for an eventual resumption of the secular bull to new all-time highs above 2879. If this bullish count is wrong, all the bear has to do is fail below at least 2591 and then 2552.

E-mini S&P 500 Weekly Chart
These issues considered, a bullish policy and exposure remain advised for long-term players with a failure below 2552 required to move to the sidelines. Shorter-term traders with tighter risk profiles are advised to move to a neutral/sideline position. The risk/reward merits of initiating directional exposure from the middle of the past quarter's range are too poor to make a bullish bet here around 2679.

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

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.