The Precise Take – Markets positioning ahead of Friday’s Employment Report and 3 day weekend

Gold:  Thanks for all the responses to our posts yesterday regarding the breakout in gold.  We will have additional thoughts to be posted intraday today.  For now, gold has indeed advanced higher again overnight, but we don’t expect a confirmation of the breakout until at least tomorrow, if not early next week.

Time Profile:  Today is an Agency POMO day; however, as we wrote Tuesday morning, the POMO edges have dwindled to nothing recently.  Additionally, we believe the Agency POMO effect of the last two months was helped in part because most of these days were Friday’s, which have had a bullish bias since March.  Accordingly, we’re not posting a Time Profile for today.

Employment Situation (NFP):  As we have noted before, the March rally was kicked off on an NFP day, and every subsequent report has been at an important support or resistance level.  As we are now in the bottom range of the week’s range, the probability (if the pattern holds) is for tomorrow’s report to result in a spike low that confirms ~991 as support in the ES, and leads to a rally into next week.  This would also confirm the positive correlation between gold and equity prices.  As always, though, we must be prepared for when patterns break, so it could be that tomorrow’s report will result in an extension of the down move.  We will have more information in tomorrow’s report (published just after the report) for what we expect the resulting move to be.

Market Profile:  As evidenced by the market profile chart below, the ES is still in the value area centered around the 995.25 point of control.  Should it break out of the value area (higher than 1006.00), it will likely test at least the minor point of control at 1016.50.  A quick rejection off that area is a very strong sell signal, but not likely to be reached today.  Above 1016.50, and the next point of control is 1024.75.  If the ES breaks above and starts accepting value there, new highs are likely.  To the downside, a break below 991.75 suggests a test of the 973.25 point of control, again not likely today.

Trading Today:  We are expecting another low range day and would fade the 1004.00 to 1006.00 area short on weakness (quick rejection of the area).  If the ES hangs around in the upper range and starts building volume there, then we would prepare for a move up to at least the monthly pivot at in confluence with daily R3 at 1011.50 to 1012.50, where again we would…

Continue reading here.