12:41 pm EDT:  Some positive vehicle sales reports have brought the ES to new intrday highs (but have not exceeded the overnight high).  Shorts may seize the opportunity to cover ahead of tomorrow’s FOMC announcement.  Critical resistance is still 1048 to 1050.25.

10:11 am EDT:  Factory Orders were up and the ES has exceeded the upper range of our preferred sell area by three ticks.  We don’t want to be short on any further surge as there could easily be a retest of the 1048.00 level.  If the ES dies here, it will be the third day in a row it sells off on a bullish report having to do with the capital goods sector.  So, if it can rally now, the worst may be over.

The Precise Take – ES tests lows overnight as leaders advance to critical levels

Leaders Analysis:  The US Dollar is up materially overnight having reached strong trendline resistance near the 77 level.  The EuroYen forex cross has headed down again towards its 200 day moving average, and gold is up immaterially overnight after yesterday’s large gain, trying to test recent highs.  We would have expected long term Treasuries to be up more after 30 Year T-Bond futures broke out of the downward trend channel and the other leaders made more substantial moves.  However, with the FOMC Announcement and Treasury’s quarterly refunding announcement tomorrow, a bit of consolidation can be expected. 

Medium Term Analysis:  Today is a relatively slow news day, with a minor Factory Orders report at 10:00 am, which we will monitor, but don’t expect big waves from.  Vehicle Sales are also released by the major auto manufacturers throughout the day (unscheduled), which could weigh on equities as September’s post-clunker sales did.  Tomorrow’s the big news day and, with the US Dollar at resistance, we would not be surprised to see a Dollar and equities reversal (down and up, respectively).  The prior FOMC Announcement did not give the expected boost and marked an interim high, but this is the exception, not the norm.

Trading Today:  Yesterday, the confluence between the monthly and weekly pivots at 1048.00 to 1050.25 were the major obstacle for the ES.  Today, 1050.25 is also the daily R1’s, so this is the level longs need to break to mark an interim bottom.  Absent some surprise good news (and note, the ES has been unable to rally even on good news), this is more likely to happen…

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