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S&P Reverting to Range Trade Following S-T Mo Failure

Posted 06/25/2018 10:45AM CT | RJO Market Insights

This morning’s failure below 19-Jun’s 2736 initial counter-trend low reaffirms the developing but very short-term trend as down and leaves Thur’s 2786 high in its wake as the new micro risk parameter it is now required to recoup to render the sell-off attempt from 13-Jun’s 2796 high a 3-wave and thus corrective affair consistent with a more immediate bullish count. In lieu of such 2786+ strength further losses should not surprise.
E-mini S&P 500 240min Chart
E-mini S&P 500 Daily Chart
Unfortunately, this admittedly short-term weakness threatens the intermediate-term uptrend from 02-May’s 2625 low close and throws the market back into the middle-half bowels of this year’s broader lateral trading range shown in the daily close-only chart above. For as we discuss often, such range-center condition present poor risk/reward metrics from which to initiate directional exposure unless there’s a very tight but objective risk parameter from which to do so. And even then, the risk assumed is more whipsaw risk than nominal risk. But nonetheless, herein lies the importance of even a micro risk parameter like 2786.

From an even longer-term perspective and on the heels of the secular bull trend shown in the weekly log chart below, we still consider this year’s lateral chop as merely corrective/consolidative ahead of the eventual resumption of the secular bull trend to new all-time highs. Commensurately larger-degree weakness below 03-May’s 2591 larger-degree corrective low and key risk parameter remains minimally required to even defer our long-term bullish count, let alone threaten it.

These issues considered, shorter-term traders are OK to move to a neutral-to-cautiously-bearish stance from 2736 OB with a recovery above 2786 required to negate this call and warrant its cover. If long-term players want to reduce the risk of another intra-range relapse, they’re OK to do so at current levels in exchange for whipsaw risk above 27856. Overall however, a bullish policy remains advised for long-term players with a failure below 2591 required to step aside. Finally, give the market’s reversion to the center of this year’s range, the last thing that should come as a surprise in the days or even weeks ahead is aimless, volatile whipsaw behavior that is expected to be treacherous and should be avoided.

E-mini S&P 500 Weekly Chart

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