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

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.