The higher value area established yesterday around 921.75 was rejected early after a failure at key R1/Fib resistance of 926.25 to 927.75 from this morning’s report (high of 926.25), but the lower value area centered around the 913.00 point of control has held.  Expect low volatility perhaps until the 7:30 and 8:15 employment-related reports tomorrow that people will be looking to ahead of Thursday’s big employment report.  Predicted maximum high and low are 921.75 and 909.50, respectively.  Support/resistance is marked below.

Incidentally, we’re opening up just shy of July’s monthly pivot of 917.50 after failing to close all week (on a 60 min chart) above June’s R1 of 924.25.

The much weaker than expected Consumer Confidence has sent markets much lower, taking out yesterday’s 911.50 swing low and hitting Globex S1 at 911.00.  Longs still need to defend 908.00 then 904.00 to 905.00, which is critical support.  Treasuries are down too as there seems to be a general exodous from the markets, possibly due to closing out Q2 positions.  Shorts can enter from 914.50 to 915.50, or wait for 918.75.

The Precise Take – Low volume start to truncated, report-laden week—Q2 09 ends today

Despite some key breakouts in markets we have been watching (Dow above 200 day MA again; KBW bank index and XLF financial ETF break above resistance; ES entering key gap area), the markets have not been able to generate follow through (the small and mid caps relative to the S&P 500 overall charted yesterday did not break out of resistance).  Perhaps everyone is waiting for the quarter to end today or for any of the plethora of reports coming down the pike into the three day weekend.  With actual human traders on vacation or gearing down, program trading could produce some violent swings, especially on Thursday’s Employment Situation report at 8:30 am (often a reversal day or close to a reversal day).  Today, Case-Shiller Home Price index at 9:00 am (expected bearish) should set the tone into the open, but Consumer Confidence could…

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The ES has established value around a new minor point of control at 921.75 on a very low volatility/volume day.  Overnight, longs will likely come in at 919.00 (day-session-only pivot), then 915.50 (50% retracement off Globex range), then major point of control at 913.00, which we expect will contain price action until the 9:00 am EDT housing report.  To the upside, 922.50 to 924.00 (today’s point of control to today’s high) will serve as heaviest resistance, then Fib/daily R1 confluence from 926.25 to 927.75, which should contain price overnight as well.

The Precise Take – ES trading in middle of range into final days of Q2 09

As we write, the ES is testing the 919.00 high of Friday (high 918.50) and, should the markets open here, would likely gap above the NYSE advance:decline ratio resistance, which usually gives the markets some bullish fuel.  918.75 to 919.50 is 50% and 61.8% Fibonacci confluence resistance and the last major barrier before the 922.75 to 934.75 volume gap.  A failure below this area today or tomorrow will make it difficult for the ES to return to highs.  After all, if the tape painters cannot drive this market up, than who can and…

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2:35 pm EDT:  We’re seeing consolidation around VWAP and a break from the 910.50 to 914.50 range could see end of week continuation; however, most likely we’ll end with a fizzle rather than a pop today.  Per the earlier post, NQ bank index has broken out of the minor trendline resistance by merely staying put, while the KBW and XLF are still approaching resistance without breaking it.

Below is an update of the IWM:SPY and MDY:SPY charts we post from time to time.  The MDY (mid caps) ratio and IWM (small caps) ratio are each at resistance.  If they don’t break today or on a gap up Monday morning, we’ll likely see a reversion to lower support on Monday, with an eventual break one way or another deciding the next trend.

ES did find support at the daily pivot point of 908.50 and has returned to VWAP at 12.50.  If 13.50 (50% retracement of overnight and day range) is sold off, we’ll likely return to lows.  Otherwise, we could easily test the 917-919 area.

The Nasdaq banking index is trying to break up through minor trend line support, with the KBW bank index squeezed between two trendlines and XLV financials ETF running up to its 200 day moving average again.  A break up through these resistance points could spark a broader rally.

Market internals and price action so far suggests a range day, with yesterday’s low having been tested within a tick (909.75 low today) and the CT long from 10.50 having seen a nice 4 pt reversal.  However, as this is Friday we do not trust the morning range session to necessarily continue into the afternoon.  Consumer Sentiment was slightly above expectations, but failed to give the markets a boost, which gives us a bearish tilt.  As we write, the ES is again testing its 909.75 low and, should it break, we look for a test of the 901.25 Fib confluence area mentioned in this morning’s report.  Shorts can fade a rally into VWAP at 913.00, but should be careful as overnight highs could easily be tested.  We would prefer to hold out for 916-919, not wanting 922 to be exceeded.  Longs should enter above 909.75 not waiting around if it is breached, then looking for that 901.25 area to hold and go long at.

The Precise Take – Markets take first steps toward painting the tape into next Tuesday

Markets discounted a worse than expected Jobless Claims pre-open and rallied on [insert reason], with bonds also up on a good showing at the 7 Year Auction.  Bernanke’s low profile Announcement has so far been a success, with the minor reversal in equities and bonds on Wednesday, being overshadowed by yesterday’s material reversals for the better.

As we write, Personal Income released at 8:30 am was better than expected  and saw a surge into the countertrend high of 918.75 (high of 919.00) and has reversed downward.  [We never recommend taking countertrend longs around news, for the record.] As long as the markets can hold the daily gap area of 908.50 (with 909.25 an important 50% retracement for new longs), we expect…

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The ES has filled the gap from 907.75 to 914.00 that provided resistance yesterday and has edged above the 913.00 point of control as we write (high of 914.75).  The VIX has also tested the 26.81 support on this run up and a new low would be noted by many.  A failure at support would also be noted.

Longs will enter at 910.50 which, if rebounded from will be very bullish with a probability of new highs.  907.75 to 908.25 is also a Fib confluence long area.  Below 905.75, longs will be discouraged and we’ll have likely seen the high for the day.  Aggressive shorts can enter at 913.00 with a stop over 915.00; however, it may be wise to hold out for the 918.00 weekly pivot in confluence with a higher point of control and the highest 50% retracement at 918.75 from contract highs.  Above 921, and we could get a strong run into the volume gap that proceeds all the way to about 935.  Accordingly, above 921, we would not try to pick tops.