should set direction for remainder of day.  VWAP has been respected throughout lunch, so we have a slightly bullish bias.  Note declining volume relative to last 10 days in green subgraph.  Normally, we would not expect much for the rest of the day, but be careful as positioning ahead of the 3 day weekend could cause significant movement.

We wrote in our May 7 09 report that “As a barometer of risk, gold is beginning to tell us that we should be concerned about this equities rally.”  May 7 was indeed the high of this rally and we have updated the chart on page 1 of that report.  The 61.8% level marked “Must hold!” has not held (though it still could on a close only basis), and there’s little keeping this market from retesting at least the 1,000 level, except for the 970 swing high of March 20 09.  This bodes poorly for equities in the near term.  Gold and equities can move in the same direction, but major technical breaches, such as the trendline below or the 61.8% failure we’ve identified often signal turning points on or within a few days for equities.

ES will likely retrace through lunch unless it can push through 900.50 soon.

Internals opened slightly bullish but have headed south.  Yesterday’s early swing low of 882.50 has provided early support.  If we breach, we’ll likely retest 877.50 lows of yesterday.  It’s not looking good for the longs and we’ll need to get above 900.50 by 11:30 am to have a close that will avoid a selloff into the long weekend.  So far, tech is leading, so watch the NQ.

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