The Precise Take – Modest overnight weakness into slow news day

Leaders Analysis:  As we wrote last week, equities and Treasuries should not continue to both advance in lockstep and we expect a return to the negative correlation early this week.  After the 30 Year T-Bond future rebounded to the upside from very strong support last Wednesday, it reached and backed off very strong resistance in the 121-122 area last Friday.  The most likely scenario is that equities reach new highs this week as Treasuries retreat further, at least into Wednesday, with Wednesday’s CPI or Thursday’s Housing Starts potential marking another reversal (down equities, up Treasuries).  With quantitative easing (POMO) drawing to an end, also in the cards is another wildcard in the form of an announcement by the Fed.  Three top Fed officials speak today and could give clues to the Fed’s next direction.  Of particular interest is San Francisco Fed Res Bank President Janet Yellen (3:50 pm EDT), who often speaks Bernanke’s mind.

Trading Today:  There is a slow economic calendar for today, so we will try to trade the range between the overnight low of 1025.00 and strong confluence resistance at 1037.25 to 1038.25, which includes the daily gap/pivot area and the Dec 09 contract’s highest volume point of control.  Should price trade outside this range, we would consider fading short the 1042.75 to 1043.75 resistance area or fading long the 1015.25 to 1017.75 support  area.  Beyond, and we will not attempt to…

Continue reading here.