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Eurodollar Resilience Re-exposes Broader Bull

Posted 02/27/2019 7:43AM CT | RJO Market Insights

MAR20 EURODOLLARS

Overnight’s break above late-Jan/early-Feb resistance at 97.48/.485 confirms the sell-off attempt to 14-Feb’s 97.355 low as a 3-wave and thus corrective affair and reaffirms AT LEAST the intermediate-term uptrend from 18-Jan’s 97.265 low.  But given the magnitude of Oct-Jan’s broader rally we’ll discuss below as well as Jan’s 97.635 – 97.265 decline that arguably is only a 3-wave and thus corrective event, a resumption of the major uptrend to eventual new highs above 97.635 should not surprise.

The important by-product of the past week’s rally is the market’s definition of 14-Feb’s 97.35 low as the latest smaller-degree corrective low the market is now required to nullify a more immediate bullish count, render the recovery from 18-Jan’s 97.265 low a 3-wave and thus corrective structure and resurrect a broader peak/reversal threat.

Eurodollar Mar '20 240 Min Chart

Today’s break above 97.485 exposes an area totally devoid of any technical levels of merit shy of 03-Jan’s 97.635 high, so the bull has every opportunity to perform straight away with now-former 97.48-area resistance considered new near-term support.  IF 18-Jan’s 97.265 low completed a 4th-Wave correction within an eventual 5-wave sequence up from 10Oct18’s 96.68 low, then we would expect to see increasingly obvious, trendy, impulsive behavior higher straight away.

By the same token, until and unless the market actually breaks 03-jan’s 97.635 high, we cannot ignore the broader peak/reversal count that contends the current rebound is just a (B- or 2nd-Wave) corrective rebuttal of Jan’s initial (A- or 1st-Wave) decline.  If this latter, bearish count is correct, we would expect the market to confirm a bearish divergence in short-term momentum somewhere between spot and 03-Jan’s 97.635 high.

Eurodollar Mar '20 Daily Chart

 

The weekly close-only chart below shows the magnitude of the magnitude of the past four months’ reversal that has thus far ran into resistance from an area marked by:

  • former 97.42-area support-turned-resistance from Mar’17
  • the (97.465) 50% retrace of Sep’17 – Oct’18’s 98.23 – 96.70 decline and
  • the (97.515) 1.00 progression of 2017’s prior 97.415 – 98.23 rally from Oct’187’s 96.70 low.

Waning upside momentum contributes to this peak/correction/reversal threat.

But as a result of overnight’s break above 97.485 and the reasons discussed above, traders now must beware a resumption of the 4-month uptrend that could may not only recoup 03-Jan’s 97.635 high, but expose potentially surprising gains.  And again, such a bullish count is predicated on this market’s ability to sustain the past week-and-a-half’s gains above 97.35 specifically.

These issues considered, long-term players remain OK to maintain a cautious bearish policy with a recovery above 97.64 required to negate this count and expose potentially steep gains thereafter.  Shorter-term traders are advised to move to a cautious bullish policy from 97.50 OB with a failure below 97.35 required to negate this count and resurrect a peak/reversal environment that could be equally major in scope.  In effect, we believe the market has defined 97.35 and 97.64 as the key directional triggers heading forward.

Eurodollar Mar '20 Weekly Chart

 

MAR 10-Yr T-NOTES

Not surprisingly, a similar technical construct is developing in the T-note market although it has thus far failed to recoup 31-Jan’s 122.19 high.  But the continued and merely lateral price action this entire month increasingly looks corrective/consolidative to the second-half of Jan’s 121.02 – 122.19 rally that should not surprise with a resumption above 122.19 and eventually 03-Jan’s 123.055 key high.

The 240-min chart below also shows 05-Feb’s 121.19 low as THE low, support and short-term risk parameter this market is now required to fail below to threaten any broader bullish count and flip the script the other way.

10-Year Note Mar '19 240 Min Chart

 

10-Year Note Daily Chart

From a broader perspective and given the magnitude of Oct-Jan’s major rally as a backdrop and clear 3-wave and thus corrective relapse attempt from 03-Jan’s 123.055 high to 18-Jan’s 121.02 low, a (5th-Wave) resumption of this major uptrend to 123.06+ levels should hardly come as a surprise at this point.

The weekly active-continuation chart below shows former 122.20-area support from Mar’17 and the (122.21) 5% retrace of Sep’17 – Oct’18’s 127.28 – 117.13 decline as thus far holding as resistance.  A clear break above this area shows NO levels of any technical merit shy of Sep’17’s 127.28 high.  This doesn’t mean we’re forecasting a move to 127.28, but it certainly does mean that the market’s upside potential above 123.06 is indeterminable and potentially severe with the ONLY levels of any technical merit then lying only BELOW the market in the form of prior corrective lows and risk parameters the market would then be required to fail below to stem the rally.

These issues considered, shorter-term traders remain advised to maintain a cautious bullish policy with a failure below 121.19 required to negate this call and warrant its cover.  Long-term players are likewise advised to move back to a cautious bullish policy and require a failure below 121.19 to pare bullish exposure to more conservative levels and subsequent weakness below 121.02 to neutralize exposure altogether as well as revert to a bearish policy.  In lieu of weakness below 121.19 and especially following a breakout above 122.19, further and possibly accelerated gains should not surprise.

10-Year Note Weekly Chart

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