The Precise Take – End of trend or shakeout?

Leaders Analysis:  An unsustainable divergence built Wednesday with the 30 Year and 10 Year Treasury futures breaking through resistance materially and the US Dollar breaking support materially.  We expected the reckoning would be postponed post-holiday, but it was not.   Volatility is such that many of the leaders have advanced from support to resistance or vice versa, so another short term reversal is now possible.

Medium Term Analysis:    The Dubai news is largely immaterial as it broke early Wednesday and did not cause an immediate reaction.  The media cannot allow a large move to be ascribed to a shakeout.  Whether or not this is a shakeout remains to be seen; however, the ES rejected a key value area yesterday (blue rectangle below) and traded back up to the lower end of its highest volume value area (green rectangle).  In addition, SPY will open just above very strong support between 108.40 and 108.58, which includes monthly R1, weekly S1, and VWAP anchored from both the Nov 2 09 low and from the Oct 07 all time high.  If this area does not hold, not only is the rally in jeopardy, but the prospect for future rallies will be suspect as well.  If it holds, the 2009 rally has material new highs ahead, perhaps into early 2010.

Trading Today:  Time constraints prevent…

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