RJO FuturesCast

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Overnight’s break above Mon’s 139.125 high reaffirms our interim recovery count introduced in 20-Mar’s Technical Blog and leaves yesterday’s 138.11 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.  Its failure to do so will confirm a bearish divergence in short-term momentum, stem the recovery and, given the market’s proximity to the upper-quarter of the past month’s range, could expose another steep, intra-range correction lower OR reinforce a broader peak/reversal process.  Per such, this 138.11 level is not only considered our new short-term risk parameter, but also a flexion point below which we believe new bearish exposure presents favorable risk/reward merits.  Until and unless the market fails below at least 138.11, there’s no way to know the current rally isn’t a (5th-Wave) resumption of the secular bull to new highs above 09-Mar’s 140.24 all-time high.

The daily chart of the contract (above) and 10-yr yields (below) show the importance of 09-Mar’s 140.24 intra-day high and 0.536% low close in contract prices and yields, respectively.  These levels represent obviously key flexion points the market needs to break to reinstate the secular bull trend in prices and decline in rates.  Given the historical nature of these levels, traders remain urged to keep a keen eye on MOMENTUM, where even an admittedly minor divergence below a level like 138.11 (above 0.726%) could evolve into a more protracted peak/reversal process.  But again, until and unless these shorter-term levels are broken and given the magnitude and backdrop of a secular bull trend that’s still arguably intact, further gains should not surprise in the period immediately ahead.

These issues considered, a cautiously bullish policy remains advised with a failure below 138.11 required to not only neutralize bullish exposure, but to reverse into a cautious bearish stance with a recovery above whatever high is left in the wake of that momentum failure required to negate the new bearish position.  In lieu of such sub-138.11 weakness, further gains to new all-time highs above 140.24 are possible.

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