The Precise Take – GDP satisfies, equities need to prove themselves with a rally

Leaders Analysis:  Overnight, the EuroYen tumbled more, to near its 61.8% key support that we updated on yesterday.  Gold advanced overnight after hitting the bottom of its trend channel yesterday, the US Dollar is up immaterially, and 30 Year T-Bonds are relatively unchanged ahead of GDP.  Overall, a slight equities bullish bias.

Medium Term Analysis:  We have been expecting some small oversold bounce the past two days but it has taken a 3.5% GDP (in line with expectations, except Goldman’s) to provide the juice.  Given the market internals and leaders reactions as of late, we will not be so quick to expect another short covering rally to new highs as we have in the past couple months.  Rallies will be swift and volatile to shake out weak shorts, but we will view them as shorting opportunities unless the markets change posture significantly.  Tomorrow is an unusually full news day for a Friday that will cap a volatile week and the end of the month.  Though Chicago PMI tomorrow at 9:42 am (released 3 min. ahead of official time to subscribers) is not expected to be a market mover, it was a surprise at the end of last month that provided some early volatility to the trading day.  FOMC and Employment Situation next week may provide rallies for possible swing shorts.

Trading Today:  The ES sold off down to the monthly pivot yesterday at 1038.50 where it settled, and on GDP, has rallied to the confluence of the 50% retracement off yesterday’s intraday high and closing VWP at 1048.75.  It’s a bit surprising the rally has not moved farther in light of GDP delivering as expected, so while we’re still willing to…

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