Posted on Nov 16, 2022, 08:43 by Dave Toth
DEC 10-Yr T-NOTE
On the heels of last Thur’s break above 27-Oct’s 111.31 initial counter-trend high discussed in that day’s Technical Webcast, this week’s resumed gains contribute to a base/correction/reversal count that could be major in scope. The 240-min chart below details this week’s continued strength that leaves Mon’s 111.275 low in its wake as the latest smaller-degree corrective low. A failure below 111.275 is needed to confirm a bearish divergence in short-term momentum, break the uptrend from at least 04-Nov’s 109.105 larger-degree corrective low and expose at least an interim corrective setback and possibly a resumption of the secular bear trend. Until and unless such weakness is proven, at least the intermediate-term trend and possibly a longer-term uptrend is intact and should not surprise by its continuance or acceleration straight away. Per such, this 111.275 level s considered our new short-term parameter from which the risk of a bullish policy and exposure can be objectively rebased and managed by shorter-term traders with tighter risk profiles.
On a broader scale and, again, given this week’s continuation of the strength following last Thur’s break above 27-Oct’s 111.31 initial counter-trend high, we believe the resulting bullish divergence in daily is sufficient to conclude 21-Oct’s 108.265 low as THE END of a 5-wave Elliott sequence down from 02-Aug’s 122.02 high as labeled in the daily chart above. It remains indeterminable whether that 108.265 low completed 3- or 5-waves major down from Aug’20’s 140.23 all-time high. But the last thing we want to do is miss the prospect for a major base/reversal count due to speculating on the former. Regardless of either count, the rally from 04-Nov’s 109.105 low is either the C-Wave of a larger-degree (4th-Wave) correction OR the dramatic 3rd-Wave of a reversal higher that could be major in scope. Always biasing towards a wave count that is consistent WITH the developing trend, we advise long-term institutional players to neutralize any/all remaining bearish exposure and policy and move to a new bullish policy and exposure with a failure below 109.105 required to negate this call, warrant its cover, render the recovery from 108.265 a 3-wave and thus corrective event and re-expose the secular bear. Until and unless such weakness is shown, further and possibly protracted gains are expected.
From a 10-yr yield perspective below, this count calls for a further and possibly a steep decline in rates with 3.906% and 4.246% corrective highs considered the analogous short- and long-term bear risk parameters.
Contributing mightily to this base/reversal count is the fact that the Bullish Consensus (marketvane.net) measure of market sentiment/contrary opinion has recently been at lows (22%) never seen in the history of this indicator since its inception in Jan 2001 as shown in the weekly chart below. This chart also shows the wave count down from Aug’20’s 140.13 high where it’s debatable whether 21-Oct’s 108.265 low completed 3- or 5-waves down from 2020’s all-time high. If this 26-month decline DID complete 5-waves, then the base/reversal higher could be massive, spanning quarters.
These issues considered, a bullish policy and exposure remain advised for shorter-term traders with a failure below 111.275 deferring or threatening this call enough to warrant moving to the sidelines. Longer-term institutional players are advised to neutralize any remaining bearish exposure and move to a new bullish policy and exposure at-the-market (113.01) with a failure below 109.105 required to negate this call and warrant its cover. In lieu of such weakness, further and possibly accelerated gains should not surprise straight away.