The market’s break today above 07-May’s 1.2991 high reaffirms the developing uptrend and leaves 12-May’s 1.2844 low in its wake as the latest smaller-degree corrective low the market now needs to sustain gains above to maintain a more immediate bullish count. In this regard 1.2844 is considered our new short-term risk parameter to a still advised bullish count.

Pound Index 240 min Chart

Pound Index Daily Chart

Today’s gains establish new highs for this year’s rally from 16-Jan’s 1.1988 low and reaffirms our major base/reversal count introduced in 23-Jan’s Technical Blog. This count has been and remains predicated on:

  • bullish divergences in both daily (23-Jan) and weekly (18-Apr) momentum
  • an arguably complete 5-wave Elliott sequence down from Jul14’s 1.7192 high (labeled in monthly chart further below) and
  • historically bearish sentiment not seen since JULY 2001!

While last Fri’s 1.2844 smaller-degree corrective low suffices as a tight but objective risk parameter for shorter-term traders with tighter risk profiles, a failure below former 1.2776-to-1.2617-range resistance-turned-support remains required to threaten a long-term bullish count enough for long-term players to take defensive steps. In lieu of such weakness is prove we believe this long-term bullish count has legs to at least the 1.35-to-1.40-area.

Pound Index Weekly Chart

Pound Index Monthly Chart

The monthly log chart above shows the historic depths to which bullish sentiment sank into that Dec’16/Jan’17 period. COMBINED with 23-Jan’s bullish divergence in momentum, the stage was set for a larger-degree correction or reversal higher. This chart along with the quarterly log scale chart below shows that the extent and uninterrupted nature of Jun-thru-Oct’16’s collapse left little in the way of former consolidative battlegrounds that might now serve as resistance candidates shy of the 1.35-to-1.40-range.

With no resistance candidates in near-term sight and today’s reaffirmation of what’s now a 4-month uptrend, a full and aggressive bullish policy remains advised with weakness below 1.2844 required for shorter-term traders to move to the sidelines and long-term players to pare bullish exposure to more conservative levels. Former 1.2775-to-1.2625-range resistance is considered key new support ahead of further and possibly accelerated gains straight away.

Pound Index Quarterly Chart

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.