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Cable Reversal Continues, Defines New S-T Bull Risk Level | RJO Futures

Posted 05/18/2017 8:56AM CT | RJO Market Insights

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

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