The Precise Take – ES posts a new contract high on holiday beginning to jam packed week

Leaders Analysis:   The EuroYen forex cross (a barometer of risk tolerance) clearly rejected its 200 day moving average Friday and has posted further gains overnight.  30 Year T-Bond futures also continued the Thursday selloff and have consolidated overnight and trendline support (the yield traversed the distance from its 200 day moving average up to its 50 day moving average).  Though we expect some consolidation in the EuroYen and T-Bonds, the moves clearly confirm the equities rally. 

Medium Term Analysis:  This week is pivotal with earnings announcements, Retail Sales Wednesday, and options expiration Friday.  As we wrote last week, equity longs would want to see new contract highs ahead of Retail Sales as it is likely to be quite poor.  Overnight, we have a marginal new contract high in the ES, and longs will look for this to be extended into tomorrow.

Trading Today:  The ES will likely gap up 4 to 6 points.  The ideal early long entry is in the 1071.00 to 1072.50 area, which includes the daily R1’s, which should now serve as support.  However, we would not be surprised to see a run down all the way to Friday’s settlement at 1068.00 to shake out weak day trade longs.  Accordingly, we are also willing to buy1067.00 to 1069.00.  Below that, there is a giant value long entry that will likely be defended…

Continue reading here.