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Bunds Making Another Run at 161-Handle

Posted 11/12/2018 8:07AM CT | RJO Market Insights

Overnight’s clear break above 06-Nov’s 160.04 minor corrective high confirms a bullish divergence in very short-term momentum has shown in the 240-min chart below.  This mo failure defines Thur’s 159.19 low and near 50% retrace of Oct’s 157.33 – 160.90 rally as the end of the relapse from 26-Oct’s 160.90 high.  As that 160.90 high remains intact as an important resistant cap and short-term risk parameter, it would be premature to conclude Thur’s 159.19 low as the end of a correction of Oct’s rally ahead of its resumption.  However, this 159.19 low has clearly been identified “enough” to render it an objective and specific risk parameter from which to take a whack at a bullish punt “up here”.

10-Yr Euro Bund Dec '18 240 Minute Chart

10-Yr Euro Bund Dec '18 Daily Chart

Indeed, the daily chart above shows the market’s proximity to the upper recesses of the range that has constrained Dec contract prices for the past four months that presents a slippery slope for bulls.  But as a direct result of today’s bullish divergence in momentum, bulls have that tighter, more conservative risk parameter at 159.19 from which to base a cautious bullish stance.  This stance would be confirmed to the point of more aggressive bullish participation on a break above 160.09.

We would also remind traders of a broader base/reversal count introduced exactly a month ago in 12-Oct’s Technical Blog following 11-Oct’s bullish divergence in admittedly short-term momentum but from the lower-quarter of the past 2-1/2-year range that provided an early warning of a broader base/correction/reversal count.  It is then well within the bounds of this broader backdrop that Fri and overnight’s intra-range rebound identifies Thur’s 159.19 low as a smaller-degree correction of Oct’s uptrend ahead of an eventual resumption of that uptrend to potentially surprising gains above not only 26-Oct’s 160.90 high but also 20-Aug’s 161.18 high.

These issues considered, traders are advised to move to a cautious bullish policy and first approach dips to 160.25 OB as corrective buying opportunities with a failure below 159.19 required to negate this call and warrant its cover.  An eventual break above 160.90 would require more aggressive bullish participation ahead of a suspected resumption of Oct’s uptrend to levels potentially well above the 161-handle.

10-Yr Euro Bund Weekly Chart

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