Bond market continues to advance and the Emini valuation becomes over sold. The Emini continued its decline, closing down 38.75 points at 1,443.00 on Friday. Meanwhile, the Bond market continued to rally in expectation of a rate cut.
Bond Market Chart
The chart above shows the Bond market bottomed in early June and broke into an uptrend in mid July. Bonds have now closed above 110, a previous support level. Trend lines on the Bond chart are drawn automatically with TradeStation code and colored red for uptrend, green for downtrend and white for consolidation.
Bond Market and Emini Valuation Chart
The chart above shows the Emini with valuation indicator added. The valuation level has now dropped to -11.3 and is at the lowest level since February 2003. Valuation levels below -6 are oversold and colored red on the Emini price bars. Overbought levels above +6 are colored white. You can read more about the Bond market and Emini valuation indicators here.
Bond market valuation shows Emini is oversold but …
The Emini has now dropped into oversold territory and looks attractive by historic bond market valuation levels. In addition, the latest Commitment of Traders data shows professionals continue to be long. So the fundamentals look good for an Emini rally. In addition, Emini volume has been at record levels over the last 2 weeks – another bullish signal.
However, cyclical indicators have yet to complete on the downside and turn. So my best guess is that we have a few more days to go before we can start taking long trades.