T-Notes, Bunds, Eurodollars Reaffirm Bullish Counts, Define New Risk Levels

November 29, 2018 8:47AM CST


Overnight's break above the 119-1/4-area that has capped the market as resistance in the now-prompt Mar contract for the past week-and-a-half reaffirms the developing uptrend and leaves yesterday's 118.305 low in its wake as the latest smaller-degree corrective low it now is required to fail below to confirm a bearish divergence in momentum, stem the rally and expose at least a more significant correction lower.  In this regard we are defining 118.30 as our new short-term risk parameter from which a still-advised bullish policy and exposure can be objectively rebased and managed.

Former 119-1/4-area resistance is expected to hold as new near-term support per any broader bullish count.

10-Yr Note Mar '19 240 Min Chart

10-Yr Note Daily Chart

As constructive as this market looks and has been from a short-to-intermediate-term perspective, traders are reminded that:

  • the recovery from 08-Oct's 117.135 low still falls well within the bounds of a 3-wave around the
  • 50% retrace of just Aug-Oct's portion of
  • the still-arguable secular bear trend shown in the weekly log chart below.

From a geeky Elliott Wave perspective, there's no way to tell at this juncture if the rally from 08-Nov's 117.225 low is the completing C-Wave of a broader bear market correction or the dramatic 3rd-Wave of a major correction or reversal higher.  We maintain a bullish policy introduced in 13-Nov's Technical Blog because 1) the market has yet to provide the evidence to counter the clear and present uptrend and 2) because the recent 38% reading in the Bullish Consensus (marketvane.net) measure of market sentiment is the lowest on record since Jan 2001.  This warns of prospective vulnerability to higher and possibly even accelerated gains straight away.

On an even broader scale 22-Aug's 120.24 high remains as the key long-term risk parameter this market still needs to break to threaten the secular bear market.  What the market has in store between spot and that 120.24 high is anyone's guess.  What is a specificity however is that 118.30 low and short-term risk parameter the market is required to fail below to threaten a bullish count and resurrect a bearish one.

In sum, a bullish policy and exposure remain advised with a failure below 118.30 required to negate this call and warrant its immediate cover.  In lieu of such sub-118.30 weakness further and possibly accelerated gains are anticipated straight away.

10-Yr Note Weekly Chart


The technical construct and expectations for the Eurodollar market are virtually identical to those detailed above for T-notes following yesterday and overnight's resumed rally above 19-Nov's 96.965 high.  This resumed uptrend leaves Mon's 96.91 low in its wake as the latest smaller-degree corrective low and new short-term risk parameter the market is now required to fail below to confirm a bearish divergence in momentum, stem the rally and expose at least a more significant correction lower.  Until and unless such sub-96.91 weakness is proven, further and possibly accelerated gains should not surprise.

Eurodollar Dec '19 240 Minute Chart

Eurodollar Dec '19 Daily Chart

The daily chart above shows the developing POTENTIAL for a bearish divergence in momentum, but a failure below 96.91 is required to CONFIRM the signal to the point of non-bullish action like long-covers.  And with the market chipping away at former and key 96.90-to-96.95-area support-turned-resistance and amidst histrionically bearish sentiment conditions, it could now be vulnerable to surprising gains straight away.

In sum, a bullish policy and long exposure from 96,75 OB recommended in 09-Nov's Trading Strategies Blog remain advised with a failure below 96.91 required to take profits and move to the sidelines.  In lieu of such sub-96.91 weakness, further and possibly accelerated gains should not surprise.

Eurodollar Dec '19 Weekly Chart


Overnight's continued gains reaffirm the developing uptrend from 05-Occt's 157.33 low and, starting with yesterday's 160.83 low, leave a litany of very minor corrective lows in its wake that can now serve as micro risk parameters from which a still-advised bullish policy can be objectively rebased and managed by short-term scalpers.  A failure below 160.83 is of an insufficient scale to conclude a more significant top, obviously.  But such a micro mo failure would be sufficient to reject/define a more reliable high and resistance from which scalpers can objectively base non-bullish decisions like long-covers.

Euro Bund Dec '18 240 Min

Euro Bund Dec '18 Daily Chart

08-Nov's 159.19 corrective low remains intact as our short-term risk parameter this market is still required to fail below to, in fact, break the uptrend from 05-Oct's 157.33 low, render the recovery a 3-wave and thus corrective affair and possibly resurrect the secular bear trend.  Until such sub-159.19 weakness is proven however, Oct-Nov's recovery cannot be ignored as one similar to Mar-Aug's rally in the weekly active-continuation chart below ahead of further and possibly sharp gains to the upper-recesses of this year's range or even the past couple years' range.

The daily chart above shows the market flirting with 17-Aug's 161.33 high that, likewise, cannot be ignored as a key resistance area that could again repel the bull.  And with the market returning to the middle-half bowels of the 2-1/2-year range, we also don;t want to underestimate the greater odds of aimless whipsaw risk, so shorter-term traders may want to consider a move to a more conservative approach to risk assumption.  This would mean an admittedly tighter risk bull parameter like 160.83 in exchange for whipsaw risk.

We would also add that we believe the past couple weeks' rising-wedge-type rally means one of two things:

  1. waning upside mo ahead of a correction or reversal lower or
  2. a sort of "coiling-up" before the uptrend goes ballistic.

These issues considered, a bullish policy remains advised with a failure below 160.83 required for short-term traders to pare or neutralize bullish exposure and subsequent weakness below 159.19 for all other traders to move to a neutral/sideline position.  In lieu of such weakness, further and possibly accelerated gains remain expected.

Euro Bund Weekly Chart

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