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Farily quiet day so far, suggesting traders have taken off for the weekend.  Late morning and afternoon will likely be quiet, with the possibility of a move in the last 45 minutes, though.

The open was below the range (1004 to 1007) that we wanted to see for an extension to further highs today, and the opening 30 minutes closed at 1001.75 (also below).  The most recent rally to the daily R1′s (high 1006.75) has seen price rejected at this level.  Accordingly, the NFP high of 1009.75 down to current highs of 1006.75 should contain price on a rally, and which we would fade short on a test.  If the ES breaks to the upside above 1010, we will not pick tops by going short and will probably not look for longs either as price could easily reverse on a dime anywhere up to the 1016 level.  We have a slightly bearish bias and could see a move down to the 996.00 major point of control (used to be 995.25, but changed yesterday), and possibly the 991.00 low made two days ago (less likely as this is too far for a range day).  We would fade long either 996 or 991.

Download the report here:

http://www.precisioncapmgt.com/wp-content/uploads/Precision_Report_September_4_09.pdf

The Precise Take – Can rally off bearish NFP report continue?

Treasury Analysis:  Treasury announced yesterday the schedule for next week’s auctions of the 3, 10 and 30 Year.  The uptrend in auction amounts has been broken for the 10 Year ($20 B down from $23 B last month) and 30 Year ($12 B down from $15 B), though the 3 Year is up ($38 B up from $37 B).  It may be a bit easier to pull off a decent auction now, but one wonders if the termination of quantitative easing (POMO buys of long term Treasuries) is weighing on this decision to sell less at auction because of anticipated problems with demand.  In an event, yields on the 30 Year hit a low of 4.10% Wednesday (down from a high of 4.84% in June) and Bernanke is not facing the same problem of out of control yields he did then.  Rather, talk has turned to concerns of deflation, and with yields at support and the 30 Year T-Bond future at resistance, we should get an extended move underway next week in one direction or the other.

NFP:  As we write, the headline number of jobs lost came in at -216,000 (middle of expectations) and the previous month was revised down by 49,000 jobs (bearish), and the unemployment rate continued to climb another tenth to 9.7%, the highest rate in 20 years (bearish).  However, support has formed at the 1000 level, just above the daily pivots, and the ES has now made new highs into the 1010 area.  The pattern has been for NFP day to mark interim highs or lows.  With today’s low being too far (in our opinion) off the 991.00 low to mark an interim low, for the pattern to hold, we would need to see 1025 today (preferably higher), then head down into next week, thus making an interim high.  All in all, the best we can say is we are getting mixed signals this time around that are suggesting some unlikely conclusions.

Trading Today:  Key today will be the opening 30 minutes to either confirm or reject the upward thrust in pre-market trading.  Longs will want to keep the ES above the range formed by…

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