1:09 pm EDT:  The ES continues to be unable to sustain a rally after favorable news, which is very bearish, having failed at the confluence of the monthly and weekly pivots.  Extreme $Tick readings (< -1400) indicate broad participation in the selloff.  We see no news until FOMC on Wednesday likely to provide a bounce and, despite being oversold by most measures, the ES is now making new lows.  Accordingly, we won’t be bottom fishers and want to see price trade above 1050.25 (weekly pivot) before expecting a short covering bounce.  1033 to 1034 is a sell area.  We would not be short above 1037 as a return to that level smells of a bear trap.  When shorts eventually cover, it will be fast and furious.

10:08 am EDT:  ISM was ahead of consensus and is giving equities a bullish tilt, the the ES up against the monthly pivot at 1048.00 as we write.  Longs should be able to capitalize on this to break through a very strong resistance from 1048.00 to 1055.50, which would set the week up for a resumption of the rally (still do not expect new highs though).  If this resistance area holds and the ES trades down through the daily pivots again ~1045.50, then bears are very strong and we will probably see new lows into Wednesday prior to FOMC.  1044.00 to 1045.00 is a buy area on a retracement.  We likely won’t fade short today.

The Precise Take – ES trying to stabilize ahead of heavy news morning

Leaders Analysis:  The EuroYen has now retraced to and bounced off its 200 day moving average, which has acted as support since May.  A close below would make the case for a more prolonged equities downturn.  30 Year T-Bond futures closed above their downward trend channel, confirming a breakout, though the yield is near the 20 and 50 day moving averages support.  Gold looks the strongest overnight, having rallied from the 1026.90 low of last Wednesday and Thursday. 

Medium Term Analysis:  Today will likely be the most difficult news day of the week, with three reports at 10:00 am.  After Friday’s inability to rally on a bullish Chicago PMI report, today’s ISM Manufacturing report will be watched closely.  Next week is light on news, so equities may be able to retrace some of last week’s losses after today, building on what should be a friendly FOMC announcement Wednesday.  New highs are unlikely, though.

Trading Today:    The early preferred trade is to be long into the daily pivots at 1041.50 to 1041.75, with an entry between 1033.00 to 1033.75, which includes Friday’s settlement.  However, if the ES opens near the pivots, we may instead…

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