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Bullish S&P Developments Almost Too Perfect; Beware “Up Here”

Posted 06/10/2019 8:12AM CT | RJO Market Insights

In last Wed’s Technical Blog following that day’s bullish divergence in very short-term momentum above 2800, we required “more” commensurately scaled strength above 16-May’s 2894 corrective high and short-term risk parameter to identify 03-Jun’s 2729 low as the end or lower boundary of a broader bull market correction.  The 240-min chart below shows that the market achieved sub 2894+ strength overnight, leaving May’s sell-off attempt from 2961 t0 2729 about as textbook a 3-wave and thus corrective structure as you’ll find.

But the developing bullish factors don’t stop there.  The prospective C-Wave of the correction down from 16-May’s 2894 high came within a mere three points of equaling (i.e. 1.000 progression) early-May’s initial (A-Wave) decline from 2961 to 2800 in length.

E-Mini S&P 500 240 Min Chart

 

E-Mini S&P 500 Daily Chart

Additionally, last week posted an “outside WEEK up” (higher high, lower low and higher close than the previous week’s range and close) amidst a return to historically bearish sentiment/contrary opinion levels that have warned of and accompanied the ends of virtually every major bull market correction ahead of either a resumption of the secular bull or significant intra-range rebounds.

It’s almost too perfect; too easy.

To be sure, these technical facts clearly identify 03-Jun’s 2729 low as one of developing importance and a new key risk parameter from which returning bulls can now objectively base resumed bullish policies and exposure.  However, 01-May’s 2961.25 high remains intact and still looms large as a resistant barrier the bull needs to break to, in fact, resurrect the secular uptrend.  This makes initiating bullish exposure “up here” near the upper-quarter of the past couple months’ range a slippery slope from a risk/reward perspective.

Revisiting the 240-min chart (top), we have noted a very short-term corrective low from Fri at 2845 as a micro risk parameter for anyone endeavoring to initiate bullish exposure up here.  A failure below 2845 won’t necessarily negate a longer-term bullish count, but it would threaten it enough to label bullish punts from 2880 or higher as too risky to maintain from a shorter-term perspective and worth covering.

S&P bulls may also note that the T-note and Eurodollar market’s have confirmed bearish divergence in momentum this morning that, given their relative inverse correlation of late would reinforce a bullish tack in equities.  We will update these interest moves in our next blog, but they are thus far of an insufficient SCALE to conclude anything more than interim corrective hiccups.

E-Mini S&P 500 Weekly Chart

Finally, from a historic perspective, the monthly log chart below shows previous assaults on prior all-time highs and resistance marked with red horizontal lines.  Understandably, these resistance areas and conditions can take time and effort for the bull to penetrate AND SUSTAIN those gains.  As textbook as the current intermediate-term technical factors are, the market’s current position at the extreme upper recesses of a range that has constrained it for nine months makes for anything but a textbook bullish situation.

These issues considered, a neutral/sideline policy is advised for the time being.  We will be watchful for a recovery-stemming bearish divergence in short-term momentum that might then expose another intra-range relapse.  In lieu of such a minor mo failure further gains should not surprise.  For those wanting or needing to bullish exposure due to the technical facts listed above, we advise a tight but objective risk parameter at 2846.

E-Mini S&P 500 Monthly Chart

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