12:13 pm EDT:  The ES has traded to below the projected range.  Accordingly, longs are aggressive.  However, there are few things that would support a long up to at least the ~1122 level.  (1) Trendline support on the combined session ES chart from Dec 18 to Dec 30 is holding.  (2) The ES took out yesterday’s day-session low by three ticks and got a buying spurt, which is a sign of a potential bear trap.  Were we to be long, we would not hold below the current low of 1117.25, however.

The Precise Take – ES testing highs on last trading day of 2009

Leaders Analysis:   Yesterday, the EuroYen suggested that global appetite for risk remained strong and, indeed, equities are up again near highs.  If the EuroYen closes above its 200 day moving average where it is trading now, there should be continuation of the move in the new year.

Medium Term Analysis:  Bullish seasonality should help equities early next week, when traders will be positioning ahead of Friday’s Employment Situation. 

Trading Today:  As has been the case recently, we don’t expect both sides of the projected range to be fulfilled.  Once one end has been reached, there may be at best a move back to…

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The Precise Take – Minor shakeout or end of trend?

Leaders Analysis:   Yesterday, we noted that several of the leaders were at inflection points, and updated intraday that the EuroYen forex cross had made a sharp intraday reversal from its 50 day moving average, which signaled to us the equities rally was drawing to a close.  Though the ES is indeed down overnight, interestingly, the EuroYen has advanced again to yesterday’s high.  The 30 Year yield looks as though it’s putting in a top, just in time for today’s 7 Year auction.  Correspondingly, 30 Year T-Bond futures are due for an oversold bounce.

Medium Term Analysis:  Overnight, the ES fell to just below the weekly pivot at 1113.75 (actual low 1113.00), and has bounced to VWAP as we write.  Respect of the weekly pivot combined with the EuroYen rally overnight suggests this may just be a minor shakeout.  A close in the ES below 1113.75, however, would negate this.  As we wrote earlier in the week, next week’s news calendar features ISM Manufacturing first thing Monday, with nothing major until Friday’s Employment Situation. 

Trading Today:  We’ll play the projected range today, which is the overnight low and the weekly pivot (1113.00 to 1113.75) on the lower end to yesterday’s low and close (1120.50 to 1121.75) on the upper end.  Today’s value area is…

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1:31 pm EDT:  The ES opened near day-session-only R1, headed down and closed the 4:00 pm gap to the tick at 1123.75 before reversing and testing R1 again.  The ensuing selloff has so far respected the lower end of the projected range at 1122.00.  With the Treasury auction over, there’s the possibility of an afternoon rally; however, per the morning report, we still would not be long below 1122.00.

The EuroYen advanced considerably overnight, but has now retraced half its gains after hitting its 50 day moving average.  This hints the current equities rally is drawing to an end and that further gains, if any, will likely be nominal, rather than material.  A close above its 200 day moving average negates this.

The Precise Take – ES up again overnight

Leaders Analysis:   Overnight, the 13 Week T-Bill rate doubled, to 0.105%.  This could merely be part of end-of-year window dressing, with institutions creating demand for cash and short duration Treasuries.  So, we’ll need to wait until the new year to confirm before coming to any broader conclusions.  The 30 Year opened flat relative to yesterday but is still testing the June highs.  This is significant with two more important auctions on deck this week.  The US Dollar is down again overnight and, notably, the EuroYen has now advanced to its 50 day moving average resistance, with the 200 day just above.  It will be important to watch how it reacts to this resistance zone.

Medium Term Analysis:  The holiday pattern has held once again, with a small range during the day session and new highs overnight. How long can this continue?  It would be reasonable to speculate at least until the end of the year, Thursday.  However, with some of the leaders at important inflection points, it could occur sooner.  A major selloff is unlikely, but we should be prepared for the possibility that traders will be quick to book profits on this gift rally.

Trading Today:  Yesterday, we watched with interest as the 1126.25 50% retracement of the entire down move from the Oct 07 high was respected to the tick.  It was, however, blown out overnight, so it is reasonable to assume…

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The Precise Take – ES to gap open on closing week of 2009

Leaders Analysis:   Overnight, the leaders have continued moving nominally in the direction of last week’s trends.  Some are close to reversal points, but for now, they continue to confirm equities strength.  We are focused on the 30 Yr yield, which is testing June highs and the EuroYen forex cross, which is creeping towards its 50 and 200 day moving averages.

Medium Term Analysis:  There are no scheduled news items this week that are expected to move the markets, though an extreme headline number would do so.  Next Monday begins with ISM Manufacturing, then focus will shift to Friday’s Employment Situation.  This week should feature more of the same low volatility intraday trading.

Trading Today:  Overnight the ES traded to 1125.00, just shy of day-session-only R2, which, in confluence with the 50% retracement of the Oct 07 high at 1126.25, forms the upper end of the projected range for today.  To the downside, the lower end is formed from…

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The Precise Take – ES poised to end week near highs

Leaders Analysis:   The US Dollar’s reversal is aiding equities, and the EuroYen has room to advance before hitting resistance.  It looks like there is still a bit room left to go next week for equities, but the Treasury Auctions could get in the way.

Medium Term Analysis:  Next week’s $118 B in T-Note auctions will begin Monday (instead of Tuesday, as is the usual).  If recent history holds, equities will be down to sideways until the 2 Yr Auction is over at 1:00 pm.  European sovereign risk remains, but there were some statements released yesterday that suggest there won’t be any major waves until after the new year.

Trading Today:  Projected range is 1119.75 to 1120.75 on the upper end (pivot resistance) and 1114.75 to 1116.00 (today’s value area) on the lower end.  There is a slim possibility of a…

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The green lines remain unchanged, but we had to add the yellow to account for the low volatility.  Support lines are drawn in horizontally.  We will be back tomorrow morning with an abbreviated morning report, but will return fully on Monday.

The Precise Take – The drift higher continues

Leaders Analysis:   The leaders are quiet overnight and relatively unchanged from yesterday.

Medium Term Analysis:  The S&P 500 cash index will likely open at or very near the 50% retracement of the entire down move that began after the high was made in October 2007.  The ES’ 50% level is just above at 1126.25, and there are a lot of long term traders that will sell into this setup with size.  When SPY reached its 50% level on December 4, the day ended down, followed by two more down days.  The bullish seasonality could temper the reaction, however, longs should exercise caution as a down move could feed on itself despite the recent low volatility.  Also, the 30 Year T-Bond yield is quickly approaching levels that will make next week’s Treasury auctions in the 2, 5 and 7 years expensive for the US (the amounts will be released today).  With the situation of certain EU states still in flux, the markets remain vulnerable to news shocks.  While short term new highs are still in the cards, swing and position longs would be well advised to watch their stops and consider the risk of holding over the three day weekend.

Trading Today:  The ES should gap up again and, on the 8:30 am report found support at yesterday’s high of 1115.75.  The projected range is…

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Green lines are unchanged; horizontal lines are new.  So far, today’s action fulfilled the upside objective by hitting the green channel line.  The next step would be to return to 1104.50 to 1106.00 by sometime tomorrow, where buyers would be expected to step in.