SEP 10-Yr T-NOTES

Yesterday’s break below 28-Jul’s 139.08 corrective low confirms our peak/reversal-threat suspicions discussed in Tue’s Technical Webcast and 05-Aug’s 140.13 high as one of developing importance and possibly a major high.  The extent and impulsiveness of the past week’s relapse is impressive and, for longer-term reasons discussed below, cannot be overlooked as just the start of a peak/reversal environment that could be major in scope.  Per such, that 140.13 high continues to serve as an increasingly key and certainly objective risk parameter from which non-bullish decisions like long-covers and bearish punts can be objectively based and managed.

The daily chart of the contract above shows yesterday’s failure below 28-Jul’s 139.08 corrective low that breaks Jun-Aug’s portion of the secular bull market.  This is a technical fact that leaves 05-Aug’s 140.13 high in its wake as THE high this market is now required to recoup to mitigate a peak/correction/reversal count and reinstate the secular bull.  On a 10-yr yield basis below, the recovery above 27-Jul’s 0.617% corrective high does the same thing, identifying 04-Aug’s 0.504% low as the end of at least Jun-Aug’s 0.898% – 0.504% decline and an objective risk parameter from which to base higher rate decisions.

Of course and as always, we cannot conclude a major reversal from proof of just smaller-degree weakness in the contract.  Indeed, commensurately larger-degree weakness below 05-Jun’s 136.22 larger-degree corrective low remains required to break the secular bull trend.  It would be premature for long-term players to give up on the secular bull until and unless this 136.22 low is broken.  However, it would not be inappropriate for long-term players to pare bullish exposure to more conservative levels and exchange whipsaw risk above 140.13 for deeper nominal risk between spot and 136.22.

Moving back even further, indicting evidence for a peak/reversal threat that could be major in scope includes:

• waning upside momentum on a massive weekly basis below
• an arguably complete 5-wave Elliott sequence that dates from Oct’18’s 117.135 low and
• historically frothy sentiment this year that hasn’t been seen since that that warned of and accompanied Jul’16’s major peak and reversal.

Again, commensurately larger-degree proof of weakness below 05-Jun’s 136.22 next larger-degree corrective low remains required to CONFIRM a bearish divergence in momentum that will break the secular bull trend.  But until this market recovers above 140.13, we anticipate further lateral-to-lower prices in the period ahead that could morph into a major reversal lower. These issues considered, a bearish policy is advised for shorter-term traders with tight risk profiles with a recovery above 140.13 required to negate this call.  And recovery attempts to roughly the 139-3/4-area or higher would be advised to first be approached as corrective selling opportunities.  Long-term players are advised to pare bullish exposure to more conservative levels and jettison the position altogether on a failure below 136.22.

SEP GERMAN BUNDS

Today’s continued erosion below 24-Jul’s 175.95 corrective low reaffirms our peak/reversal count discussed in Tue’s Technical Webcast and confirms 31-Jul’s 178.01 high as one of developing importance and very possibly the start of a C- or 3rd-Wave down that could break 19-Mar’s 170.87 low.  This bearish count is based on the prospect that the recovery attempt from 19-Mar’s 170.87 low is a (textbook) 3-wave and thus corrective structure that warns of a resumption of Mar’s downtrend that preceded it.  Further larger-degree verification will come from a break below 02-Jul’s 175.04 next larger-degree corrective low and key risk parameter.

The fact that this month’s bearish divergence in momentum stems from the extreme upper recesses of the past YEAR’S range would seem to question the risk/reward merits of a continued bullish policy “up here” and reinforce a peak/correction/reversal threat that could be major in scope.  And the goings-on in U.S. Treasuries certainly would seem to reinforce this call as well. These issues considered, traders are advised to maintain or move to a bearish policy and exposure with a recovery above 178.01 required to negate this call and warrant its cover. In lieu of such 178.01+ strength, further and possibly accelerated losses straight away should not surprise with a failure below 175.04 opening the spigot.