11:02 am EDT:  As the headline suggests, 30 Year T-Bond futures are right at critical resistance at 122, a close over which equity longs do not want to see today, and especially tomorrow.  There is still potential for a reversal in T-Bonds, but this is a warning.  The yield on the 30 Year dipped below 4.0% this morning, where it has not been since the April 29, 2009 FOMC day.  Mortgages rates will remain low, but as we have written, a short covering rally in Treasuries siphons money from equities.  The close this week will be very important.

Short term today, the ES has found support just above Monday’s overnight low (actual low of 1036.75).  Another down leg to the daily S2′s at 1030.75 to 1033.00 (combined  and day session, respectively) is possible to shake out additional longs, but .  Shorts will try to reassert themselves in the 1041 to 1043.75 area.  Longs want to see a close over 1043.75 today to keep the support base in tact overnight into tomorrow’s report.  Our preferred trade until the late afternoon is to play the 1030.75 to 1043.75 range, not hanging around for more than a point in either direction if the range is exceeded.  As always, we will look to price action around these levels to determine trade viability.

The Precise Take – ES consolidating into heavy end-of-week news cycle

Leaders Analysis:   The range in 30 Year T-Bond futures appears the tightest and is at very important resistance, so we continue to look to it as a potential bellwether or confirmation of the next equities move.

Medium Term Analysis:  While we were waiting for tomorrow’s Employment report at 8:30 am to lead the eventual direction of equities, the ES is consolidating and, in the face of a heavy news day that touches on personal income, jobs, manufacturing, construction and housing, we may get a breakout today.  We have drawn trendlines on the chart below and believe an upside breakout is more significant than a downside breakdown because, quite simply, all the breakdowns in the 2009 rally have been reversed on short covering rallies.  We would not be surprised to see the 1035.75 low of this week taken out by a few points prior to a rally, should it occur.  We’re also a bit cautious about Friday’s Employment report because it had been a reliable trend reverser (usually up) until the prior month.  Just as the last FOMC Announcement was an unreliable equities supporter in September, we would also not be surprised to see some tricky price action around Friday’s report.  We will have a much better idea of what is in the cards after the close today.

Trading Today:  As we write, the two 8:30 am reports have not moved the markets much.  If the ES opens above 1041.00, we would like a long into the daily pivot/gap are of 1051.00 to 1054.00.  Aside from that, we need to see where price is in relation to our expected range and potential reversal areas to determine what to do after the three 10:00 am reports, which should generate…

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