RJO FuturesCast

Daily Futures Market News, Commentary, & Insight


S&P Recovery Continues, But Beware

Posted 01/31/2019 7:57AM CT | RJO Market Insights


Yesterday and overnight’s resumed rally above 18-Jan’s 2678 high reaffirms the past month’s recovery from 26-Dec’s 2137 low and leaves 23-Jan’s 2612 low in its wake as the latest smaller-degree corrective low the market now needs to sustain gains above to maintain a more immediate bullish count.  Per such and given a number of factors discussed below, we are considering this admittedly very tight corrective low a key risk parameter from which a bullish policy can be objectively rebased and managed.

Former 2675-area resistance would be expected to hold as new support IF the market has something broader to the bull side still in store for us “up here”.

E-Mini S&P 500 240 Min Chart


E-Mini S&P 500 Daily Chart

While the past month’s recovery has not been unimpressive, we have to remember that the market is “only” back to middle-half bowels of the past four months’ range and well within the bounds of a MAJOR correction that could unfold more in terms of TIME than price similar to May’15-to-Feb’16’s correction shown in the weekly log chart below.  Additionally, the following facts and observations should be considered threats to the recent recovery:

  1. waning momentum on a daily log scale basis above
    1. this divergence will be considered CONFIRMED to the point of non-bullish action on a failure below 2612
  2. the market’s flirtation today with the (2688) 61.8% retrace of Sep-Dec’s 2947 – 2317 meltdown
  3. the prospect that the past couple days’ rally may be the completing 5th-Wave of the rally from 26-Dec’s 2317 low as labeled in the daily and 240-min charts above
  4. yesterday’s bullish divergence in T-note and Eurodollar momentum that we’ll discuss below.

These issues considered, a bullish policy and exposure remain advised with a failure below 2612 required to defer or threaten this call enough to warrant a move to the sidelines to circumvent the depths unknown of a correction or reversal lower.  In lieu of such sub-2612 weakness further and possibly accelerated gains should not surprise.

E-Mini S&P 500 Weekly Chart



Yesterday’s sharp spike above 24-Jan’s 121.27 high and our short-term risk parameter updated in Tue’s Technical Blog confirms a bullish divergence in momentum that confirms at least the intermediate-term trend as up, leaves yesterday’s 121.16 low in its wake as the latest smaller-degree corrective low and 18-Jan’s 121.02 low in its wake as the end of only a 3-wave decline from 03-Jan’s 123.055 high.  Left unaltered by a relapse below that 121.02 low, the first-half of Jan’s 3-wave skid is arguably a corrective/consolidative event that warns of a resumption of Oct-Jan’s uptrend that preceded it.

Per this backdrop yesterday’s 121.16 low is considered our new short-term risk parameter the market is now minimally required to fail below to threaten a resumed bullish count calling for what could be an impulsive run at early-Jan’s 123.055 high or above.  And given the relative inverse correlation between Treasuries and equities, such further gains in T-notes warrant close attention to whether or not Mar E-Minis can sustain yesterday’s gains above our tight but key bull risk parameter at 2612.

10-Yr Note Mar '19 240 Min Chart


10-Yr Note Daily Chart

It remains indeterminable to s whether 03-Jan’s still-pertinent 123.055 high completed 3- or 5-waves from 08-Oct’s 117.135 low labeled in the daily chart above.  This is why we cannot ignore the bullish prospect that Jan’s relapse to 121.02 is a 4th-Wave correction ahead of a resumption of the bull.  While that 123.055 remains intact however, neither can we ignore the bearish prospect that the past couple weeks’ recovery is just a corrective retest of that high ahead of a resumption of the peak/correction/reversal count we’ve espoused since 04-Jan’s bearish divergence in momentum.  What we can determine with specificity are the corrective lows and risk parameters the market now needs to sustain gains above to maintain a bullish count: 121.16 and certainly 121.02.

In sum, shorter-term traders have been advised to move to a neutral/sideline position and can even entertain a cautious bullish stance from 122.00 OB with a failure below 121.16 required to negate this call and warrant its cover.  Long-term players are advised to pare bearish exposure to more conservative levels and jettison the position altogether above 123.06.

10-Yr Note Weekly Chart



Eurodollar Mar '20 240 Min Chart


The technical construct and expectations for the Mar20 Eurodollar market are virtually identical to those detailed above for T-notes following yesterday’s bullish divergence in momentum above 97.37 that leaves yesterday’s 97.32 low in its wake as the latest smaller-degree corrective low and new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.  Former 97.37-to-97.35-area resistance would be expected to hold as new support per any broader correction or reversal higher.

Eurodollar Mar '20 Daily Chart


Eurodollar Mar '20 Weekly Chart

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