The Precise Take – Equities maintaining into final Treasury auction of the week

Medium to Long Term Analysis:  Below is the 30 Year T-Bond futures chart updated through this morning, which shows the 30 Year still hovering around resistance (red rectangle).  That it didn’t retrace this week to the 61.8% (or even the 50% level) of the most recent upswing is bullish for it (and bearish for equities), but today’s 7 Year auction will likely be the catalyst to either new highs or a stronger retracement downwards.  Our bias is for a strong 7 Year (bearish for equities) as we had last month, but anything is possible as always.

Time Profile:  Today is the day after the FRNY has conducted permanent open market operations (POMO).  Since inception of POMO in Mar 09, there has been a bullish bias in the opening hour and a bearish bias in the closing hour.  These biases dissipated slightly in May and June, but have reasserted in July and August (see page 2 for chart).  If there are gains today, we would warn to protect profits before heading into the close.  If we head down today, losses could accelerate into the close.

Trading Today:  As we write, GDP (revised) and Jobless Claims released at 8:30 am caused a slight upsurge to 1031.00 in the ES, with a subsequent retreat downwards.  We always pay head to spike highs on important news around contract highs, so longs will need to head higher early to prevent a potential selloff.  The one mitigating factor to this bearishness is the…

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