RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

After last week’s plunge the 240-min chart below shows that this week’s continued sell-off attempt has become quite the grind, creating the POTENTIAL for a bullish divergence in momentum around the area of the (1.0650) 61.8% retrace of Feb-Mar’s 1.0493 – 1.0906 rally.  A recovery above yesterday’s 1.0690 minor corrective high will CONFIRM the bullish divergence in mo that will leave whatever low is left in the wake of that divergence as the END of the decline from 27-Mar’s 1.0906 high and our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

The KEY OPPORTUNITY resulting from such a mo failure is the longer-term bullish prospect that the recent extensive relapse is actually a correction within a major base/reversal environment from 03-Jan’s 1.0341 low that, if correct, exposes potentially huge gains above Mar’s 1.0906 high.  The risk/reward merits of a bullish punt following an immediate recovery above 1.0690 could be extraordinary.

Euro Index 240 min Chart


Euro Index Daily Chart

From a longer-term perspective our long-term bullish count introduced in 31-Jan’s Technical Blog remains intact until the market breaks our longer-term risk parameter defined by 22-Feb’s 1.0493 low shown in the daily log scale chart above.  This bullish count is predicated on the following technical facts:

  • late-Jan’s bullish divergence in WEEKLY momentum that defined 03-Jan’s 1.0341 low as the
  • end of a 5-wave Elliott sequence down from May’16’s 1.1617 high amidst
  • historically bearish sentiment levels typical of major base/reversal environments and
  • the market’s failure to sustain Dec/Jan losses below the prior 21-MONTHS of 1.04-handle-area support-turned-resistance.

Feb-Mar’s break above 02-Feb’s 1.0829 initial counter-trend high exposes the longer-term trend as up until negated by a failure below 1.0493.  Against this backdrop the late-Mar/early-Apr relapse attempt is not only considered a correction, its more extensive depth creates a particularly attractive risk/reward ratio ahead of a suspected resumption of the past QUARTER’S basing behavior to eventual new highs above 1.0906.

Euro Index Weekly Chart


It’s also notable that the resumed decline from May’14’s 1.3993 high spanned an identical length (i.e. 1.000 progression) to 2008-2010’s prior decline from 1.6040 to 1.1876 on a monthly log scale basis below.  With our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC still at a relatively depressed 32% reading reflecting 113K shorts to just 53K longs, it’s not hard to find fuel for upside vulnerability should the market force the capitulation of this over-weight bearish exposure in a now-uptrending market.

These issues considered, longer-term players remain advised to maintain a bullish policy and exposure with a failure below 1.0493 required to negate this call and warrant its cover.  Shorter-term traders are advised to move to a neutral/sideline position from current 1.0670-area prices and move to a bullish position on the immediate breakout above 1.0690 with protective sell-stops below 1.0625.

Euro Index Monthly Chart


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