RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Yesterday afternoon and overnight’s bust-out above the past 3-1/2-weeks’ 120.23-area resistance reaffirms the recovery from 15-Feb’s 119.14 low in the Jun contract and leaves Mon’s 120.11 low in its wake as the latest smaller-degree corrective low this market is required to sustain gains above to maintain a more immediate bullish count. Per such this 120.11 level is considered our new short-term risk parameter from which a neutral-to-cautiously-bullish policy can be objectively rebased and managed. Also, former 120.28-to-120.23-area resistance would be expected to hold as new support if the market has something more bullish in store for us.
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Against the backdrop of the major uptrend in 10-yr rates shown in the daily log scale chart below, the past month’s relapse remains well within the bounds of a mere correction ahead of an eventual resumption of the broader move higher. This said, strength above Mon’s 2.86% minor corrective high (analogous to the 120.11 level in the Jun contract) is minimally required to threaten this relapse, render it the 3-wave and thus corrective affair we suspect it is, and re-expose the major move higher. In lieu of such 2.86%+ strength traders are advised not to underestimate the depth of this intermediate-term slide in rates (rally in the contract). Former 2.79%-area support is considered new near-term resistance expected to hold if the market has a steeper rate slide ahead.
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Finally and from a very long-term perspective, it’s easy to see in the weekly chart of the contract above and long-term daily log close-only chart of rates below that the secular bear trend in T-note prices remains intact and that recovery attempts should first be approached as corrective selling opportunities. Former multi-year support from the 122-handle serves as a hugely important resistance candidate. Minimally, a recovery into a 123- or even 124-handle is required to even threaten what arguably is a new secular bear market in T-note prices that we believe could last a generation.

These issues considered, a neutral-to-cautiously-bullish policy remains advised for shorter-term traders with a failure below 120.11 required to threaten this call enough to warrant moving to a temporary neutral position. Long-term players are advised to move to a neutral/sideline position in exchange for whipsaw risk (below 120.11 or even 119.14) to circumvent the heights unknown of an interim correction or a broader reversal higher. A relapse below 120.11 would threaten any broader bullish count and provide a more effective and manageable condition from which to re-position from the bear side.

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