The ES has broken last week’s low, so the pattern we have been following (extreme negative sentiments in the NYSE advance:decline ratio leading to bottoming within two days and posting subsequent new highs) is now a dead possibility.  We expect there are many other patterns people have been following in this 2009 rally that are also breaking down.  The ES has found marginal support at the 898.50 level, which is close enough to the 900 level to attempt a long with a stop just below 898.50.  However, should the ES trade below weekly S1 at 897.00, we would not be bottom fishers today until around the 880 area.  Shorts are expected to enter at 902.50 to 904.50.  If the ES breaks above 905, we would hold out for 911.00 as a short.  If the ES breaks above the pivot at 916.50, we would no longer look for shorts.

This morning, the Dec 09 gold futures contract bounced off its 61.8% retracement support from the April low to the June high.  In the rally begun March 09, previous bounces of gold off support have lead to minor corrections in equities.  However, I believe if gold bounces strongly from here, it could lead to a larger sell off in equities as they are more vulnerable than before.  If gold falls farther, it could provide minor support for equities.

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