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T-Notes Reaffirm Secular Bull, Eurodollars Poised To

Posted 08/15/2019 7:51AM CT | RJO Market Insights

SEP 10-Yr T-NOTES

This morning’s recovery above 07-Aug’s 130.275 high and our short-term risk parameter nullifies last week’s bearish divergence in momentum and chalks up that sell-off attempt as another interim correction within the secular advance.  This resumed strength leaves 08-Aug’s 129.12 low in its wake as the lower boundary to this latest correction and the level this market is now required to fail below to confirm another bearish divergence in momentum needed to even defer, let alone threaten the major bull.  Per such this 129.12 level serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a resumed bullish policy.

Commensurately larger-degree weakness below former 128.14-to-127.275-area resistance-turned remains minimally required to threaten the major bull on a long-term basis for long-term players to neutralize a bullish policy and exposure.

The magnitude of the major uptrend is obvious in the weekly chart above.  There remains no levels of any technical merit above the market shy of Jul’16’s 134.075 all-time high.  In effect, there is no resistance.  The ONLY levels of any technical merit currently exist only BELOW the market in the form of prior corrective lows like 129.12 and areas of former resistance-turned-support like 128.14-to-127.27.

Because of changes in the basis, traders are also advised to beware of contract prices that will be associated with the 1.35% all-time low in 10-yr yields shown in the weekly log close-only chart below.  Given the 3-wave and thus corrective structure of 2016-18’s recovery attempt and just like the count in German bunds that we’ve been comparing this T-note market to for months, we believe this bull market is on its way to yields around or below Jul’16’s 1.356% low weekly close.  The market’s currently within 20 bps of that threshold.

These issues considered, a full and aggressive bullish policy and exposure remain advised for long-term players with a failure below 127.27 required to threaten this call enough to warrant its cover.  Shorter-term traders whipsawed out of bullish exposure following 08-Aug’s bearish divergence in momentum are advised to re-establish cautious bullish exposure on a setback to 130.10 OB with a relapse below 129.12 required to negate this specific call and warrant its cover.  In lieu of weakness below at least 129.12, we anticipate further and possibly steep gains straight away.

JUN20 EURODOLLARS

The 240-min (above) and daily (below) charts show that this market has yet to recoup 07-Aug’s 98.695 high.  But by virtue of this morning’s recovery above Mon’s 98.595 high and short-term risk parameter that renders the recent 98.695 – 98.46 sell-off attempt a 3-wave and thus corrective affair, we suspect a resumption of the secular bull trend lies straight ahead.  The important by-product of today’s recovery above 98.595 is the market’s definition of Tue’s 98.46 low and 38.2% retrace of early-Aug’s 98.095 – 98.695 rally as the end or lower boundary of another interim correction within the secular advance and our new short-term risk parameter from which shorter-term traders with tighter rsk profiles can objectively rebase and manage the risk of a resumed bullish policy.

31-Jul’s 98.095 next larger-degree corrective low remains intact as our key long-term risk parameter for longer-term players.

The magnitude of the secular bull s clear in the weekly close-only chart above and monthly chart below that we believe has its sights set on Jul’16’s 98.815 all-time high and above.  Might that 2016 cap result in another interim corrective setback?  Possibly.  And we will gauge such another interim vulnerability by a momentum failure below a recent corrective low like 98.46.  Until and unless at least such sub-98.46 weakness is proven, a resumption of the secular bull should hardly com as a surprise.

In sum, a bullish policy and exposure remain advised for long-term players with a failure below 98.09 require to threaten this call enough to warrant its cover.  Shorter-term traders whipsawed out of bullish exposure following 08-Aug’s bearish divergence in short-term mo are advised to re-establish bullish exposure at-the-market (98.61) with a failure below 98.46 required to negate this specific call and warrant its cover.

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