11:18 am EDT:  One of the benefits of keeping track of multiple forms of support and resistance is to be able to spot traps in advance.  A good setup will have an obvious support or resistance level (recent high/low, Fib, moving average) close to a hidden level (market profile point of control, longer time frame pivot, etc.) that is not as well-followed.  Once the ES broke the overnight high and traded two ticks higher to yesterday’s point of control at 1107.50, there was an immediate 2.5 point selloff on the 1 minute chart (below), which confirmed the bull trap. 

T-Bonds are flat, but the EuroYen is trading very close to its 200 day moving average.  The average is sloping upwards and the prior two visits to this line have supported price strongly.  A test will likely coincide with CPI tomorrow morning, and this is the leader to watch. 

In the ES, yesterday’s low and daily S1 of 1091.00 to 1091.50 is still strong support, but the 1:00 pm Housing Index cannot disappoint too much.

The Precise Take – ES consolidating gains ahead of tomorrow’s CPI

Leaders Analysis:  Despite yesterday morning’s large gains in equities, 30 Yr T-Bonds pushed higher throughout the day, especially after Bernanke’s noon remarks.  Interestingly, the EuroYen trended lower all day and overnight, so both were non-confirming of equities strength.  Unless the 9:00 am Treasury International Capital report shows a flight from Treasuries and causes T-Bonds to reverse, their strength should catch up with equities today, and we would be surprised to see material equities gains.

Medium Term Analysis:  After PPI (out as we write), there are four more major reports in the next 24 hours, culminating with CPI tomorrow at 8:30 am.  An extreme divergence from consensus could always create volatility, but this should be a range day otherwise.  As we wrote yesterday, this has been about the time when previous month’s rallies begin their topping process.  This does not preclude new highs this week, but longs should be on alert, especially in light of the T-Bonds breakout yesterday.  

Trading Today:  The ES sold off yesterday’s settlement in confluence with closing VWAP all night (actual high 1107.00).  However, yesterday’s point of control at 1107.50 and weekly R1 at 1108.25 loom just above, which creates the possibility of an early bull trap with a break of the overnight high.  If that occurs, there should be a…

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