1:55 pm EDT:  If we were going to get a sizable short covering bounce, we would like for it to have begun much earlier.  Markets did not react much to Obama’s plan for financial reform.  Accordingly, barring some out of left field news that sparks a rally, we are only making aggressive trade recommendations here.  915.00 to 915.50 is a Fib confluence area that aggressive shorts can fade.  Above that, we would not want to get short until the next Fib confluence area at 925.50 to 926.25 where the ES will be overextended.  Aggressive longs can enter at 910.50 or above, but should not stick around below 908.00.  If the market heads higher, it will likely be from here, so new longs will likely not get in unless they are willing to enter at what appear to be high prices relative to the day’s range.  Such is trading today.

10:16 am EDT:  So far quiet action with no Tick <-800 or >500.  As we wrote in the morningn update, XLF financial ETF and KBW bank index broke trendline support yesterday and Nasdaq bank index broke critical horizontal support of 1537 this morning.  Be on alert for surprise news announcement or Obama’s 12:30 pm EDT speech regarding regulatory reform, which could goose the financials and engineer a short covering rally if the proposed regs are not as onerous as markets are anticipating.  As always, we watch the 5 min candle for this, which should close at highs and on abnormally high volume.

902.00 was critical 61.8% support that held (902.50 low so far) and the ES has encountered resistance at the 907.50 50% retracement from the overnight high and the gap from yesterday’s close.  Longs can enter on a pullback to 905.00 or a retest of lows.  Shorts can enter on retest of 907.50, or anywhere from 909.50 to 911.00, but should not hang around above overnight highs at 912.75 as the ES is oversold and could quickly bounce on a short covering rally.

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