SEP 10-Yr T-NOTES
The extent of the market’s recovery the past half-week relative to 23-May’s 126.01 minor corrective high is sufficient to render the sell-off attempt from 18-May’s 126.13 high to last week’s 125.145 low a 3-wave affair as labeled in the 240-min chart of the now-prompt Sep contract below. Left unaltered by resumed weakness below 125.145 this 3-wave setback is considered a corrective/consolidative event that warns of a resumption of the uptrend that preceded it. Per such 125.14 is considered our new key risk parameter from which a cautious bullish policy can be objectively rebased and managed ahead of a run at and potential breakout above 18-May’s 126.13 high. Once beyond the 126.00-area around which this market has pivoted the past week-and-a-half, we will expect it to be a source of new support from which subsequent gains and a bullish policy can be effective based and managed.
Admittedly, this 125.14 level is very tight for a “longer-term” risk parameter, but we believe the market’s proximity to the extreme upper recesses of the past month-and-a-half’s range shown in the daily close-only chart above warrants such a more conservative approach to risk assumption until the market confirms the broader bull with a clear and decisive break-out above the 126.06-area resistant cap.
Traders are reminded that from an even longer-term perspective shown in the weekly log scale chart below the past five months’ recovery from 15Dec16’s 122.145 low is arguably a bear market correction coming on the heels of last year’s meltdown. These issues considered, longer-term traders remain advised to maintain a bullish policy and exposure with a failure below 125.14 required to threaten this call enough to warrant moving to the sidelines if not a cautious bearish policy. Shorter-term traders whipsawed out of bullish exposure following 19-May’s bearish divergence in short-term mo discussed in that day’s Technical Blog are advised to return to a cautious bullish policy from current 126.01 levels OB with a failure below 125.14 required to cover the trade.
Against the backdrop of the broader recovery shown in the daily chart below, the recent sell-off attempt from 18-May’s 98.515 high to last week’s 98.395 low is considered a 3-wave and thus corrective affair as labeled in the 240-min chart above. The Fibonacci fact that this setback stalled at the exact (98.395) 50% retrace of early-May’s preceding 98.275 – 98.515 rally would seem to reinforce this bullish count and call for a run at and potentially through that 98.515 high. In this regard last week’s 98.395 low is considered our new short-term risk parameter from which a still-advised bullish policy and exposure can be objectively rebased and managed by shorter-term traders with tighter risk profiles.
From a long-term perspective traders are reminded that this market is still afflicted by the trifecta of base/reversal-threat factors:
- a confirmed bullish divergence in WEEKLY momentum amidst
- historically bearish sentiment not seen in 22 YEARS and
- an arguably complete 5-wave Elliott sequence down from Jul’16’s 99.12 high weekly close.
We continue to believe that the 2016-17 decline is just the INITIAL 1st-Wave of a new secular bear market that could span a generation. But as a result of these factors listed above the market is now vulnerable to a not unexpected (2nd-Wave) correction of last year’s decline that could be extensive in terms of both price and time.
These issues considered, a bullish policy remains advised with weakness below 98.39 required for shorter-term traders to move to the sidelines and commensurately larger-degree weakness below 09-May’s 98.275 low and key risk parameter required for long-term players to do the same. In lieu of such weakness we anticipate a resumption of the past couple months’ recovery to eventual new highs above 98.52.