The Precise Take – Asian-lead selloff–can a POMO close save the day?

Leaders:  Because 30 Year T-bond futures held support last week and advanced as equities held their ground, it is in very good shape to weather next week’s (likely) record breaking auctions.  We wanted to see a close above 119’08.5 in the 30 Year this weak and, after poking above it Friday, we could get it today.  The announcement of next week’s auction amounts will be this Thursday at 11:00 am.  At 9:00 am today, we will get a look at the monthly Treasury Int’l Capital report to gauge continuing foreign interest in the US’ long term Treasuries.  The data will be six weeks old, but it is important nonetheless.  On the overnight weakness, gold has broken last week’s lows and the EuroYen forex cross is down sharply as well.

Time Profile:  Similar to our comments from Friday, today’s time profile suggests that we could have another strong close, despite likely being net down for the day.  Strong closes on POMO days have historically been reversed the following day.  The July rally erased this edge temporarily with several strong follow up days.  However, with renewed weakness in equities, it may be time to revisit these plays and short weak issues on a strong POMO close.  If the close is weak instead of strong, we would want to see other reasons to short.

Trading Today–Putting it all together:  We do not get intraday bullish unless and until the ES can climb over the 995.50 market profile point of control from Friday.  Below that and we’re primarily looking for shorting opportunities, though we would fade long at the next lower long term point of control at 973.25, if we saw buying come in.  Overnight, the combined day and night session daily S2 has provided support and shorts will want to break this area early to continue the directional move.  Assuming no major disturbances in the 9:00 am TIC report noted above, the key news item for the day will be

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