Posted on Jul 13, 2023, 07:17 by Dave Toth
The extent and impulsiveness of the past week’s recovery and break overnight above 03-Jul’s 112.175 minor corrective high and area of former support-turned-resistance from mid-Jun defines 06-Jul’s 110.05 low as one of obvious developing. Per such and for some intermediate-to-longer-term reasons we’ll discuss below, we’re defining 110.05 as our new short-term parameter from which traders can objectively base the risk of non-bearish decisions like short-covers and new cautious bullish punts. 26-Jun’s 113.165 larger-degree corrective high, while only in the middle of the past NONE-MONTH lateral range, is our new long-term bear risk parameter.
On a broader scale, the daily chart of the contract above and daily log close-only chart of actual 10-yr yields below show the scope of the past nine months’ lateral chop. What may prove particularly important in the weeks ahead about the past couple days’ relapse in rates is that it stems from the extreme upper recesses of the nine-month range. This setback in rates has thus far only pulled back to an area of former resistance-turned-support around the 3.821%-area, with further erosion below 28-Jun’s 3.7065 corrective low required to, in fact, break Apr-Jul’s uptrend and confirm a bigger, if intra-range relapse and continuation of a major correction or reversal process from 24Oct22’s 4.251% high.
The analogous contract level to 28-Jun’s 3.706% corrective low in rats is 26-Jun’s 113.165 corrective high shown in the daily chart above. A recovery above 113.165 will suffice in breaking Apr-Jul’s downtrend and expose a recovery to the upper-quarter of the nine-month range and possibly a major reversal higher. Per such, this 113.165 level (3.706% yield) is considered our key long-term bear risk parameter pertinent to longer-term institutional players.
On an even longer-term weekly active-continuation basis below, the nine-month debate over whether the price action from last Oct’s 108.265 low is a correction within the secular bear trend OR a major base/reversal process remains. A recovery above 113.165 however will at least confirm the continuation of lateral-to-higher prices within the correction and possibly contribute to a broader base/reversal count.
These issues considered, shorter-term traders are advised to move to a neutral/sideline position as a result of today’s recovery above 112.175. We will be watchful for proof of 3-wave corrective behavior on smaller-degree setback attempts to reinforce a bullish count and provide a preferred risk/reward opportunity from the bull side. Longer-term institutional players are advised to pare bearish exposure to more conservative levels and jettison remaining exposure on the immediate recovery above 113.165.
