1:06 pm EDT:  Downside action was achieved quickly, with the ES breaching the 1063.00 long term point of control that was respected to the tick on Oct 13 when the ES was rallying (actual low today of 1062.25).  The ES is now accepting in this value area bounded by 1057.25 to 1070.00, the lower end of which should serve as support over the next day should we get new lows.  1073 to 1074 remains a sell area where we expect longs from last week’s lows to cover. 

Leaders:  After breaking strong support this morning, 30 Year T-Bond futures are back up on the equitites selloff.  The EuroYen has posted a bearish engulfing on the daily (so far) and gold has broken to the downside through its pennant–all equities bearish.  With the 30 Year yield hitting nearly 4.4% earlier and demand concerns for this week’s Treasury auctions, equities may need to take a more substantial hit to support the auctions on a flight to quality basis.

11:40 am EDT:  After initially driving up through the daily and weekly pivots, the ES was not quite able to make it to the lower of the daily R1′s at 1089.50 (actual high of 1088.50), and certainly not up to the top of the green downward trend channel from the morning report in the ~1092 area.  In fact, the yellow upward channel has now been broken to the downside.  As we write, NYSE $Tick is posting <-1200 readings as price in the ES is testing the daily S1′s (1067.25 to 1068.00).  We’re not excited about fading long after this move because two of the prior three days featured relentless selling with new lows toward the close.  Retracements for shorting opportunities will likely be shallow, but we would take 1o73 to 1074.  Only a move back above the weekly pivot at 1082.00 will start spooking the shorts.

The Precise Take – ES marginally higher overnight into critical economic report week

Leaders Analysis:   The EuroYen has slowed its ascent as it approaches long term resistance, 30 Year T-Bond futures are resting at support, and gold continues to consolidate in a pennant formation.  This points to a pivotal week for the equities rally, but no clues yet as to direction.

Medium Term Analysis:  The two reports this week that will draw the most attention are Durable Goods on Wednesday and GDP on Thursday.  CS Home Price Idx and Consumer Confidence are also important tomorrow, and there are a number of large Treasury auctions that will be closely watched.  Swing and position shorts will be looking for entries on any minor equities rallies, so it will likely take an upside surprise in DG or GDP to force them to cover.  Next week features an FOMC meeting and the monthly Employment Situation, which will likely facilitate the ultimate directional move. 

Trading Today:  There is heavy resistance between the daily pivots and weekly pivot from 1080.50 to 1082.00, which provides the ideal early day trade short entry.  Just above, a long term market profile point of control at 1084.25 provides a protective stop.  We would not give that level more than a point on a short because…

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