10:57 am EDT:  True to form for 2009, we are in the midst of another short squeeze, the ultimate success of which will likely be determined by a close over confluence resistance of September’s ES settlement of 1053.00 and weekly R1 at 1054.25.    We will cautiously buy pullbacks to as low as the 1047.00 level, but not below, as there is still the possibility of shorts defending this last outpost and reversing the week’s upward move.  Certainly, we will not fade short strength on new highs.

Gold has broken out strongly with the Dec 09 contract piercing the 1040 level.  Though the USD is down materially today, we are still seeing the gold move confirmed in all the major currencies, including the AUD, which is impressive in light of its monetary tightening actions this morning.  30 Year T-Bond futures have finally traded below the critical 122 level again.  Only the EuroYen forex cross refuses to behave and confirm the other moves, however, we will give it a day to catch up before drawing any further conclusions.

The Precise Take – ES at critical resistance off USD weakness

Leaders Analysis:   Overnight, the Australian central bank became the first (major CB) to raise rates (1/4 pt to 3.25%).  The USD is down as expected against the AUD, but also all the other major crosses.  Equities have been repriced in the weakened USD and are up materially on the news.  Interestingly, there seems to be no fear of a similar Fed hike, which would weigh on equities.  With the BOE and ECB to meet early Thursday, there is the potential, though unlikely, for more surprises.  We had speculated on Treasury weakness to boost equities (still possible), but this works as well.

Trading Today:  The ES got the expected bounce yesterday, and with no sellers, posted a high to toward the close at the monthly pivot of 1038.50.  Overnight, the ES has traded above the 1043.50 point of control and is at critical trendline resistance (see below) for the shorts.  We expect the daily R1’s to provide support at 1043.25 to 1043.75 and daily R2’s to provide resistance at 1049.50 to 1050.75.  We are willing to trade off…

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