The market’s failure this morning to sustain last week’s losses below former 130.25-to-130.31-area support-turned-resistance confirms a bullish divergence in short-term momentum.  This mo failure defines 21-Oct’s 129.31 low as one of developing importance and possibly the END of a textbook and considerable 5-wave Elliott sequence down from early-Aug’s high.  Per such, this 129.31 level is considered our new short-term but key risk parameter from which non-bearish decisions like short-covers and new bullish punts can be objectively based and managed.

Commensurately larger-degree strength above 14-Oct’s 131.195 next larger-degree corrective high and key risk parameter remains required to confirm a bullish divergence in daily momentum, but given the market’s proximity to and rejection thus far of the extreme upper recesses of the 7-month range on a yield basis we’ll discuss below, we believe today’s momentum failure is an early indication of more protracted gains in the contract in the weeks ahead.

The daily close-only chart of the contract above shows the  nicely developing POTENTIAL for a bullish divergence in daily momentum.  Combined with the prospect of a textbook complete 5-wave sequence down from 02-Aug’s 134.135 high close and the market’s rejection of the extreme upper recesses of the 7-month range on a yield basis below, traders are warned of a more protracted recovery in the contract and relapse in yields that could be extensive.  A recovery above 14-Oct’s 131.16 larger-degree corrective high and our key risk parameter (below 14-Oct’s 1.506% yield) remains required to CONFIRM the divergence and broader reversal.  But until the contract relapses below last week’s 129.31 low and short-term risk parameter, we believe the risk/reward metrics are now tilting in favor of the bull and lower rates.

It also notable against this developing backdrop that the Bullish Consensus ( has dropped to a 2-year low of 49% and that the bear had the chance to PERFORM following last week’s break below 05-Apr’s pivotal 130.25 low.  Again, today’s momentum failure is of too small a scale to conclude a broader reversal, but we believe the risk/reward metrics are turning in favorable of the bull and are presenting a favorable and objective opportunity from the bull side, at least on an intermediate-term basis.

These issues considered, traders are advised to take profits on all previously recommended bearish policy and end exposure and move to a new cautious bullish policy and exposure at-the-market (130.31) with a failure below 129.31 required to negate this call and warrant its cover.  If, after an initial counter-trend rebound, the market reinforces this count with proof of a labored, 3-wave corrective retest of last week’s low, more aggressive bullish exposure will be advised.

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