Micro T-Note Failure "Up Here" Presents Favorable Risk/Reward Sale

August 27, 2018 10:26AM CDT

Fri's slip below 21-Aug's 120.12 very minor corrective low confirms a bearish divergence in momentum as detailed in the 240-min chart below. This mo failure is, admittedly, of a scale insufficient to conclude anything more than a very minor correction lower. It hardly is of a scale necessary to conclude the end of this month;s broader recovery from 01-Aug's 119.025 low. Yet, and for ancillary reasons we'll specify below, we are advising traders to conclude exactly this with a pure risk/reward selling opportunity and strength above 22-Aug's 120.24 high required to negate this call.
10-Year Note Sep '18 240 Minute Chart

The fact that this admittedly minor mo failure has unfolded from the extreme upper recesses of the past five months' lateral range AND that the potential for a bearish divergence in daily momentum below is clear raises the compelling nature of this peak/reversal threat and opportunity. A relapse below Fri's 120.115 low is needed to CONFIRM this daily bearish divergence and provide the next echelon of weakness needed to contribute to this peak/reversal threat that we believe offers an excellent risk/reward selling opportunity even though the market has yet to satisfy our three reversal requirements on even a micro scale. The fact that the risk of this bearish punt is only about 6/32s from current 120.18-area prices presents raffle-ticket risk with, we believe, favorable odds of a profitable payout.

Indeed, with only additional proof of weakness below Fri's 120.115 low, this market could become prone to a return to the lower-quarter of the multi-month range, or lower. And with equity indexes posting new all-time highs, such a T-note relapse isn't hard to fathom.
10-Year Note Sep '18 Daily Chart

The weekly chart below shows the magnitude of what we still believe is a new secular bear market in T-note prices that could span a generation. Commensurately larger-degree strength above AT LEAST the key former 122-handle-area support-turned-resistance minimally required to threaten this call.

These issues considered, not to mention today's gap-up opening, we believe a favorable risk/reward opportunity is being presented from the bear side. Traders are advised to establish bearish exposure at-the-market (120.175) with protective buy-stops at 120.245 ahead of what we believe may be the market's rejection (again) of the upper recesses of the 5-month range and ahead of a return to its lower-quarter around 118-3/4 or below. Strength above 120.24 is required to negate this specific call and warrant its cover.

10-Year Note 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.