RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

SEP 10-Yr T-NOTES

Today’s failure below 23-May’s 119.03 minor corrective low in the now-prompt Sep contract confirms a bearish divergence in short-term momentum.  This mo failure identifies last week’s 120.195 high as one of developing importance and possibly the end of a 3-wave recovery from 09-May’s 116.21 low as labeled in the 240-min chart below.  Left unaltered by a recovery above 120.195, this 3-wave recovery attempt may be considered a corrective/consolidative event that now warns of a resumption of the secular bear trend that preceded it.  Per such, this 120.195 high is considered our new mini risk parameter from which a resumed bearish policy and exposure can be objectively rebased and managed.

As commensurately larger-degree weakness below 18-May’s 118.015 larger-degree corrective low remains required to CONFIRM May’s recovery as a 3-wave and thus corrective structure, this level remains arguably intact as a risk parameter from which non-bearish decisions like short-covers can still be objectively based and managed.  But against the backdrop of the secular bear market, traders are advised to bias towards a resumed bearish count until the Sep contract recoups 120.195.

On a longer-term basis, only a glance at the daily chart above and weekly chart below is needed to see the magnitude of the secular bear market and likelihood that May’s paltry recovery attempt, at least thus far, is just a correction within the major trend lower.  If/when the bear resumes to new lows below 117.085, we will be able to trail our long-term bear risk parameter from 125.175 to last week’s 120.31 high on an active-continuation basis.

Basis 10-yr yields, this week’s recovery leaves 26-May’s 2.702% low as the prospective end or lower boundary to a 3-wave and thus corrective setback in May and a mini risk parameter from which a count calling for a resumed hike in rates can be objectively based and managed.  This said, a recovery above 18-Ma’s 3.015% high remains required to CONFIRM May’s setback in rates as a corrective affair and re-expose the secular move higher in rates.

These issues considered, a bearish policy remains advised for long-term institutional players with a recovery above at least 120.31 required to defer or threaten this call enough to warrant paring or neutralizing exposure.  Shorter-term traders with tighter risk profiles whipsawed out of bearish exposure following 12-May’s bullish divergence in sort-term momentum are advised to return to a bearish policy and first approach any rebounds to 119.00 OB as corrective selling opportunities with a recovery above 120.195 required to negate this call and warrant its cover.  In lieu of a recovery above 120.195, we anticipate a resumption of the secular bear market to new lows in the contract below 117.085 and new highs in rates above 3.203%.

DEC23 EURODOLLARS

The technical construct and expectations for the Dec23 Eurodollar market are identical to those detailed above in T-Notes following today’s bearish divergence in short-term momentum below 23-May’s 96.87 corrective low.  This mo failure defines 26-May’s 97.105 high as the end or upper boundary of a 3-wave and thus corrective recovery attempt from 04-May’s 96.42 low ahead of an eventual resumption of the long-term bear trend to new lows below 96.42.  Per such, this 97.105 level serves as our new mini risk parameter from which a resumed bearish policy and exposure can be objectively rebased and managed.  This said, commensurately larger-degree weakness below 18-May’s 96.68 larger-degree corrective low remains required to confirm May’s 96.42 – 97.105 recovery as a 3-wave and thus corrective structure consistent with a still-unfolding secular bear market.

The weekly chart below shows the sheer magnitude of the major bear market in which May’s recovery attempt easily falls within the bounds of a mere (probable 4th-Wave) correction.  If/when the market breaks to new lows below 96.42, we’ll be able to trail our long-term bear risk parameter from 97.575 to 97.105.  These issues considered, traders are advised to maintain or return to a bearish policy and exposure with a recovery above 97.105 required to threaten this call enough to warrant a move to the sidelines.  In lieu of such strength, further and possibly accelerated losses should not surprise.

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