JUN E-MINI S&P 500

Overnight’s recovery above 17-Apr’s 2885 high and our short-term risk parameter discussed in 21-Apr’s Technical Blog nullifies that day’s bearish divergence in short-term momentum, chalks up last week’s sell-off attempt as a correction and reinstates the recovery from 23-Mar’s 2174 low.  This resumed strength leaves 21-Apr’s 2717 low in its wake as the latest smaller-degree corrective low this market must now sustain gains above to maintain a more immediate bullish count.  Per such, this 2717 level becomes our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively base non-bearish decisions like short-covers and a resumed bullish policy.

This tight but objective risk parameter at 2717 may come in handy given the developing POTENTIAL for a bearish divergence in daily momentum (above) as the market nears the (2930) 61.8% retrace of Feb-Mar’s 3398 – 2174 collapse on a linear scale.  We’ve identified this general area as a pivotal one for the bull given the extent and impulsiveness of Feb-Mar’s plunge that arguably breaks the secular bull market and maintains the long-term bearish prospect that the past month’s recovery is merely a correction within a major peak/reversal process.  Until and unless the market fails below at least 2717 however needed to CONFIRM the momentum divergence to the point of non-bullish action, at least the intermediate-term trend is up and should not surprise by its continuance.

Reinforcing a bullish count is the fact that sentiment/contrary opinion levels remain at historically bearish levels, suggesting the huddled masses do not trust the current recovery.  This warns that the market may be “vulnerable” to higher levels straight away with a lot of green between spot and 20-Feb’s 3398 all-time high the market is required to take out to resurrect the secular bull trend.

These issues considered, a cautious bullish policy remains advised for long-term players with a failure below 2717 required to threaten this call enough to warrant paring exposure to more conservative levels.  Commensurately larger-degree weakness below 27-Mar’s 2635 high and former key resistance-turned-support is required to neutralize remaining exposure as that would render Mar-Apr’s recovery attempt a 3-wave and thus corrective affair that would re-expose Feb-Mar’s downtrend that preceded it.  Shorter-term traders with tighter risk profiles whipsawed out of bullish exposure as a result of 21-Apr’s momentum failure are advised to return to a cautious bullish policy and exposure from the 2885-area OB with a relapse below 2717 required to negate this count and warrant its immediate cover and reversal.

JUN 10-Yr T-NOTES

Arguably corroborating resumed strength in the S&P is yesterday’s bearish divergence in short-term momentum below 22-Apr’s 138.265 initial counter-trend low in the Jun T-Note contract detailed in the 240-min chart below.  This admittedly short-term momentum failure defines 21-Apr’s 139.22 low as the end of at least a textbook 5-wave rally from 07-Apr’s 137.16 low.  Per such, this 139.22 level serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively base non-bullish decisions like long-covers and cautious bearish punts.

The interesting thing about today’s bearish divergence in short-term mo is that it stems from the extreme upper recesses of the past month-and-a-half’s range amidst waning upside momentum on a DAILY basis shown in the bar chart above and close-only chart below where it’s conceivable that the market may also be nearing or at the end of a larger-degree 5-wave Elliott sequence that dates from late-Dec’19’s lows.  Commensurately larger-degree weakness below 07-Apr’s 137.16 intra-day low or a close below 08-Apr’s 137.27 corrective low daily close is needed to CONFIRM the divergence on this scale, break the uptrend from at least 19-Mar’s 133.21 larger-degree corrective low and expose a more protracted correction or reversal lower.  In effect, we believe the market has identified 137.16 and 139.22 as the key directional triggers heading forward.

The daily log close-only chart of 10-yr yields shows waning downside momentum at the extreme lower recesses of the past month-and-a-half’s range that reinforces a count calling for at least an interim corrective recovery in rates and possibly a more protracted reversal higher.  This questions the risk/reward merits of a bullish policy in the contract “up here”.

Lastly, the combination of:

• waning upside momentum on a weekly scale below
• historically frothy bullish sentiment not seen in 3-1/2 years and
• an arguably complete or completing 5-wave Elliott sequence from Oct’18’s 117.13 low

is hard to ignore as a threat to the secular bull trend.  Nonetheless, given the magnitude of this secular bull move, clearly, large-degree weakness below at least 07-Apr’s 137.16 corrective low and preferably 19-Mar’s 133.21 corrective low is required to truly threaten the major bull trend and warrant consideration of a new bearish policy. In sum, shorter-term traders are advised to neutralize bullish exposure and first approach recovery attempts to 138.27 OB as corrective selling opportunities with a recovery above 139.22 required to negate this call and warrant its immediate cover.  Long-term players are OK to pare still-advised bullish exposure in exchange for whipsaw risk above 139.22, but commensurately larger-degree weakness below 137.16 remains minimally required to neutralize exposure ahead of a larger-degree correction or reversal lower.