RJO FuturesCast

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The market’s failure this morning below our short-term risk parameter defined by 30-Jan’s 1.0620 low breaks the uptrend from 03-Jan’s 1.0341 low and defines 02-Feb’s 1.0829 high as one of developing importance and our new short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.  At this juncture there is no way to know if Jan’s rally from 1.0341 to 1.0829 is another correction within the secular bear trend to eventual new lows below 1.0341 OR the initial (A- or 1st-Wave) rally of a base/reversal process that could be absolutely major in scope.

The former bearish count would be expected to show trendy, impulsive losses straight away in a behavioral manner similar the breaks in 4Q16.  IF this current relapse is a corrective component of a broader base/reversal count, we would expect a more grudging, labored decline that would be stemmed by a bullish divergence in momentum somewhere north of 03-Jan’s pivotal 1.0341 low and perhaps around the 1.0585-to-1.0527-range defined by the 50% and 61.8% retraces of Jan’s 1.0341 – 1.0829 rally.

Euro Index 240 min Chart


Euro Index Daily Chart

The threat of a major base/reversal count is predicated on the following technical facts:

  • a confirmed bullish divergence in momentum that breaks at least the downtrend from 18Aug16’s 1.1367 high
  • historically bearish sentiment typical of such base/reversal environments
  • the market’s gross failure (thus far at least) to sustain Dec’s break below Mar’15’s headline low and support at 1.0462 and
  • the prospect of a complete 5-wave Elliott count down from May’16’s 1.1617 high.

The extent and 5-wave impulsive nature of Jan’s rally would also contribute to a count calling for at least a larger-degree correction within the secular bear market that may have weeks or months to go and reach levels potentially well above last week’s 1.0829 high.  For the time being however and until the market arrests the current relapse with a bullish divergence in short-term mo, we anticipate at least further lateral-to-lower prices in the period immediate ahead and potentially a sharp resumption of the secular bear to new lows below 1.0341.

Euro Index Weekly Chart


These issues considered, shorter-term traders have been advised to move to a neutral/sideline position and can even take an objective punt from the bear side on a hiccup to 1.0750 OB with protective buy-stops above 1.0830.  Longer-term players are advised to maintain a sideline position and wait for and require a bullish divergence in short-term mo from the 1.0525-area OB as an early indication of a broader base/reversal count that would warrant dipping the toe in on a new bullish policy.  Needless to say a recovery above 1.0830 will reinforce a bullish count and expose potentially significant gains thereafter while a break below 1.0341 will reinstate the secular bear trend to unknown depths below.

Euro Index Monthly Chart



The technical construct and expectations for the USD Index are virtually identical to those detailed above for the Euro, only inverted.  As a result of the past week’s recovery we believe 02-Feb’s 99.23 low marks the END of the decline from 03-Jan’s 103.82 high and start of either a steeper correction of the 103.82 – 99.23 decline OR a resumption of the secular bull to new highs above 103.82.  In this regard 99.23 becomes our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

Dollar Index 240 min Chart


Dollar Index Daily Chart

The daily log scale chart above and weekly chart below show the unique combination of a confirmed bullish divergence in momentum from an exact 38.2% retrace of May’16 – Jan’17’s entire 91.92 – 103.82 rally.  The general 100.00-area is also a hugely important former resistance area that now serves as a key new support candidate.  IF the secular bull market is still intact, we would expect it to resume from 02-Feb’s 99.23 low. HOWEVER…..

The extent and impulsiveness of Jan-Feb’s sell-off attempt cannot be ignored as the prospective initial (A- or 1st-Wave) decline of a peak/reversal PROCESS that could be major in scope.  Recently historically frothy bullish sentiment is typical of such major peak/reversal environments and this technical tool has been rendered “applicable” following the bearish divergence in momentum below 08-Dec’s 99.43 low that defines 03-Jan’s 103.82 high as one of developing importance and THE KEY risk parameter the market needs to recoup to mitigate any bearish count and reinstate the secular bull.

Dollar Index Weekly Chart


Compelling to a major peak/reversal count is the Fibonacci fact that the rally from May’11’s 72.69 low stalled within a mere 1/2-pt of the (103.32) 1.618 progression of the preceding rally from Mar’08’s 70.70 low to Mar’09’s 89.62 rally amidst the developing potential for a bearish divergence in mo that would be massive in scope.  Of course, on this massive scale, a failure below May’16’s 91.92 corrective low is required to CONFIRM this divergence.  But we should get smaller-degree evidence of a peak/reversal environment well before that long-term requirement.

These issues considered, we anticipate at least a more extensive correction of Jan’s 103.82 – 99.23 decline and possibly a resumption of the secular bull market.  We will keep a keen eye on any bearish divergence in momentum around the 101.50-to-102.00-area that would provide the initial evidence of a broader peak/reversal count and present what could be an outstanding risk/reward selling opportunity.  A relapse below 99.23 will reinforce a broader bearish count and expose potentially accelerated losses immediately thereafter.

Dollar Index Quarterly Chart

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