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Interest Rates

Tighten S-T Bull Euro Bund Risk to 158.89

Posted 04/12/2018 10:14AM CT | RJO Market Insights

On the heels of Mar’s nice uptrend the past couple weeks’ mere lateral chop looks to be about as bull-market-corrective as it gets. Or so it would seem. And clearly, a failure below 05-Apr’s 158.89 lower boundary to this pattern would threaten a corrective count in favor of a peak/reversal one, so that 158.89 level is considered our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a still-advised but interim bullish policy ahead of a resumed rally to new highs above 159.69.
Euro Bund Jun '18 240min Chart
Euro Bund Jun '18 Daily Chart
The daily chart above shows these past couple weeks’ corrective chop within the context of our interim bullish count resurrected in 14-Mar’s Technical Blog that should not surprise at all by its continuance. On a daily close-only basis below however, this bull did resume with 06-Apr’s 159.57 new high close above 27-Mar’s 159.38 previous high, creating the very nice POTENTIAL for a bearish divergence in momentum. A close below 05-Apr’s 159.08 corrective low close or a break below 05-Apr’s 158.89 intra-day low will be considered sufficient proof of a mo failure to threaten the uptrend and expose a larger-degree correction or more significant reversal lower, warranting defensive measures like long-covers and cautious bearish punts.
Euro Bund Jun '18 Daily Chart
Traders are urged to be suspicious of ANY momentum failure “up here” as the market approaches a huge former support-turned-resistance area around the 160-handle on a weekly log active-continuation basis below. For IF the decline from Nov’17’s 163.87 high is a (3rd-Wave) component of what we believe to be a new secular bear trend in interest rate markets globally, then that ton of former 160-handle-area support would be expected to now hold as new resistance after Jan/Feb’s resumption of a year-and-a-half downtrend below it. IF, alternatively, the Jun’16 – Feb’18 decline is only a 3-wave and thus corrective structure ahead of a resumption of the secular bull to eventual new highs above 161, then, minimally, the past couple months’ uptrend needs to break that 160-handle and perform impulsively higher. So, from a long-term perspective, the market’s engaging a quite important 159/160-area and acute condition where even an admittedly short-term momentum failure could have long-term implications to the bear side.

These issues considered, a cautious bullish policy remains advised with a failure below 158.89 threatening this call enough to warrant moving to a neutral/sideline position in order to circumvent the depths unknown of an interim correction or more significant reversal lower. In lieu of such sub-158.89 weakness, further gains to at least another round of new highs above 159.69 should not surprise.

Euro Bund Weekly Chart

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