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Hopeful News for S&P Bulls

Posted 11/26/2018 8:04AM CT | RJO Market Insights

DEC S&P E-MINI

Given two full months of peak/reversal-threat behavior, the market is far from out of the woods and, indeed, is just a stone’s throw away from 29-Oct’s pivotal 2603 low.  However, the nicely developing POTENTIAL for a bullish divergence in short-term momentum is clear in the 240-min chart below.  And stemming from the extreme lower recesses of the past month’s range would be an added benefit if CONFIRMED by strength above 21-Nov’s 2671.25 minor corrective high.  Per such we are lowering our short-term risk parameter to 2672, the recovery above which will confirm this admittedly minor bullish divergence in momentum that will allow us to conclude only a minor bottom but one from which shorter-term non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

E-Mini S&P 500 240 Min Chart

E-Mini S&P 500 Daily Chart

The daily log chart above shows the preponderance of the past couple months’ price action that this market remains BELOW.  A bullish divergence in short-term momentum will not allow us to conclude the start of something bigger to the upside.  But given the:

  • market’s close proximity to 29-Oct’s 2603 low
  • historically bearish sentiment levels typical of broader BASE/reversal-threat conditions shown in the weekly log chart below and
  • the similarity thus far of the past couple months’ price action to Jan-Apr’s previous bull market correction

we would not want to underestimate the market’s ability to recover more significantly before year’s end.

These issues considered, a bearish policy remains advised with a recovery above 2672 sufficient to warrant moving to a neutral-to-cautiously-bullish stance with a subsequent relapse below Fri’s 2626 low required to negate this call and re-expose a broader bearish count.

E-Mini S&P 500 Weekly Chart

DEC 10-Yr T-NOTES

Given the relatively negative correlation of late between S&Ps and Treasuries, it doesn’t come as a surprise that the potential for a bearish divergence in short-term mo is developing in Dec T-notes as indicated in the 240-min chart below.  This indicator will be considered CONFIRMED to the point of non-bullish action like long-covers on a failure below 21-Nov’s 119.005 minor corrective low.  Per such we are identifying 119.000 as our new short-term risk parameter to a still-advised bullish policy.

10-Year Note Dec '18 240 Minute Chart

 

10-Year Note Daily Chart

While a sub-119.00 mo failure would be of only a minor scale, the Fibonacci fact that it be stemming from the exact (119.14) 61.8% retrace of Aug-Oct’s 120.24 – 117.135-portion of the secular bear trend would seem to reinforce its relevance.  Also, the recovery THUS FAR from 08-Oct’s 117.135 low is clearly only a 3-wave affair that, left unaltered by continued impulsive strength above 119-1/2, easily fits as a mere correction consistent with the secular bear market shown in the weekly chart below.  Moreover, a sub-119.00 bearish divergence in momentum would be seen as a reinforcing proxy to a bullish count in S&Ps.

These issues considered, a bullish policy remains advised with a failure below 119.00 required to move to a neutral-to-cautiously-bearish stance with subsequent strength above 119.15 required to negate that call.

10-Year Note Weekly Chart

 

DEC19 EURODOLLARS

The technical construct and expectations for the Dec19 Eurodollar market are virtually identical to those detailed above in Dec T-notes with last Wed’s 96.89 low being the latest smaller-degree corrective low and new short-term risk parameter the market needs to sustain gains above to maintain a more immediate bullish count.  Its failure to do so will confirm a bearish divergence in momentum, break the uptrend from 08-Nov’s 96.71 low and expose at least a more extensive, if intra-range correction lower.

Eurodollar Dec '19 240 Minute Chart

 

Eurodollar Dec '19 Daily Chart

Here too the recovery from 18-Oct’s 96.71 low is thus far only a 3-wave structure as labeled in the daily chart above.  Furthermore, it has returned to an area of key former support around the 96.95-area from mid-May until mid-Sep that, since broken, is considered a key new resistance candidate.  If there’s a time and place for this suspected correction to fail and yield once again to the secular bear, it is here and now.

These issues considered, a bullish policy remains advised with a failure below 96.89 required to move to a neutral-to-cautiously-bearish stance with subsequent strength above 97.00 required to negate this call.

Eurodollar Dec '19 Weekly Chart

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