RJO FuturesCast

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While the market remains deep within the middle-half bowels of the 1.08-to-1.03-range that has constrained it for the past four months, Fri and overnight’s recovery above 16-Feb’s 1.0681 high and short-term risk parameter identified in 22-Feb’s Technical Blog breaks the sell-off attempt from 02-Feb’s 1.0829 high and leaves Thur’s 1.0524 low in its wake as the latest smaller-degree corrective low the market is now required to break to mitigate what could be a resurrected and major BASE/reversal threat.  In this regard 1.0524 becomes our new short-term parameter from which the risk of non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.

Euro Index 240 min Chart


Euro Index Daily Chart

The daily log scale chart above shows the market still stuck within the 1.08-to-1.03-range of the past four months that maintains the debate as to whether the price action from 03-Jan’s 1.0341 low is merely corrective ahead of an eventual resumption of the secular bear trend OR a base/reversal process that could have far-reaching bullish implications for the Euro.  We would remind traders that late-Jan’s recovery above 05-Dec’s 1.0765 corrective high close confirmed a bullish divergence in momentum that defines 20-Dec’s 1.0386 low close or 03-Jan’s 1.0341 intra-day low as arguably the END of the decline from at least 18Aug16’s high.  This technical fact warned then of a larger-degree correction OR major reversal higher, a call that has been reinforced with Fri’s confirmed bullish divergence in daily momentum above.

Now the market has identified THREE key lows and risk parameters from which to objectively base short-covers and cautious bullish punts:  1.0524, 22-Feb’s 1.0493 low and certainly 03-Jan’s 1.0341 low and key risk parameter.  IF the recovery attempt from 03-Jan’s 1.0341 low is merely corrective ahead of a resumption of the secular bear trend to new lows below 1.0341, minimally now it is required to break below at least 1.0524.  Until and unless such sub-1.0524 weakness is proven, there’s no way to know that the market is not in a major BASE/reversal PROCESS that could surprise the world with a sustained move above 02-Feb’s 1.0829 high.

Euro Index Daily Chart


Euro Index Weekly Chart

Integral to a major base/reversal-threat call is the historically bearish sentiment levels that, understandably, continue to plague the Euro.  But it is from exactly such bearish headline sentiment that virtually all of the major base/reversal processes stem as it is the extent to which the globe’s traders have their collective necks sticking out on the bear side that leaves the market vulnerable to higher prices AFTER the market breaks the clear and present downtrend as it did in late-Jan.

These issues considered, traders are advised to move to a very cautious bullish policy and first approach setback attempts to an area of former resistance-turned-near-term-support at 1.0600 OB as corrective buying opportunities with a failure below 1.0524 negating this call.  In lieu of such sub-1.0524 weakness further lateral-to-higher prices are expected with 02-Feb’s 1.0829 high the key upper threshold this market needs to break to confirm a major base/reversal environment.

Euro Index Monthly Chart



Dollar Index 240 min Chart


Needless to say, when the technical aspects of the Euro are improving, the USD Index is afflicted by the inverse.  Fri and overnight’s failure below 06-Mar’s 101.22 low detailed in the 240-min chart above confirms a bearish divergence in daily momentum shown in the daily log scale chart below.  The fact that this mo failure occurred around the (102.02) 61.8% retrace of Jan-Feb’s 103.82 – 99.23 decline is consistent with a broader peak/reversal-threat environment that suggests that decline and recovery attempt are the (A- or 1st-Wave and B- or 2nd-Wave) components of a major correction or reversal of the secular bull market in the USD.  As a result of the recent short-term weakness the market has identified 02-Mar’s 102.26 high and 03-Jan’s 103.82high as ones of developing importance and our new short- and longer-term risk parameters from which non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.

Dollar Index Daily Chart

Dollar Index Weekly Chart

Contributing to a peak/reversal environment that could be major in scope are:

  • historically bullish sentiment not seen since at least Mar’15’s major peak/correction-lower
  • late-Jan/early-Feb’s bearish divergence in momentum below 08-Dec’s 99.43 high
  • an arguably complete and major 5-wave Elliott sequence from May’11’s 72.69 low shown in the QUARTERLY chart below
  • the Fibonacci fact that the rally from May’11’s 72.69 low spanned a length exactly 61.8% longer (i.e. 1.618 progression) than 2008-09’s preceding 70.70 – 89.62 rally.

OF COURSE it is grossly premature to conclude anything more than a slightly larger-degree correction lower following such relatively minor weakness since 03-Jan’s 103.82 high.  But until and unless this market can prove strength above at least 102.26, we must also acknowledge other factors that warn of potentially surprising losses in the weeks or even months ahead.  Per such traders are advised to move to a cautiously bearish policy and first approach rebound attempts to the 101.50-area OB as corrective selling opportunities with a break above 102.26 required to negate this call and warrant a return to the sidelines.

Dollar Index Quarterly Chart


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