RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

The market’s recovery this morning above yesterday’s 1.2889 corrective high confirms a bullish divergence in short-term momentum that defines today’s 1.2769 low as the END of the decline from 18-May’s 1.3049 high.  Per such this 1.2769 low serves as our new micro risk parameter from which any non-bearish decisions like short-covers and bullish punts can be objectively rebased and managed.

While the market has only returned to the middle of the past couple weeks’ range and while 18-May’s 1.3049 high remains intact as a resistant cap and short-term risk parameter, the risk/reward merits of initiating bullish exposure around current 1.2900-area prices is questionable.  As discussed in Fri’s Technical Blog however, we cited the 1.2800-area as one of prospective support per our long-term bullish count to eventual new highs above 1.3050.  Today’s admittedly minor mo failure identifies today’s 1.2769 low as a tight but objective one from which even longer-term players can use as a gauge of the broader bull.

Pound Index 240 min Chart

Pound Index Daily Chart

The daily chart above clearly shows the upper-1.27-handle as one of key former resistance dating back to Dec’16 that would be expected to hold per a broader bullish count.  Today’s low is also just 20 pips away from the Fibonacci minimum (1.2788) 38.2% retrace of a suspected 3rd-Wave rally from 07-Apr’s 1.2365 low to 18-May’s 1.3049.  And if that weren’t enough, the market is working on an “outside day” up (lower low, higher high and higher close than yesterday’s range and close).

These technical facts follow a bullish divergence in WEEKLY momentum below amidst historically bearish sentiment that, in the case of the Bullish Consensus (marketvane.net) hasn’t been seen since Jul 2001!  Such a combination is a unique and compelling one that’s typical of major BASE/reversal environments.

Pound Index Weekly Chart

The factors cited above are consistent with our call for a major correction or reversal of the secular bear market shown in the monthly log scale chart below.  We anticipate a recovery to at least the 1.35-to-1.38-range that supported sterling from as far back as 2009 which, since broken in Jun’16, serves as a key long-term resistance candidate.

In sum, longer-term players remain advised to maintain a bullish policy with weakness below at least 1.2769 and preferably 1.2617 required to threaten or negate this call.  Shorter-term traders with tighter risk profiles are advised to return to a bullish policy and first approach intra-range relapse attempts to the 1.2850-area OB as corrective buying opportunities with a failure below 1.2769 required to negate this call.  There’s no telling how long this market might waft within the 1.3050 – 1.2770-range, but we anticipate and eventual resumption of the major uptrend to new and potentially significant highs above 1.3050.

Pound Index Monthly Chart

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