11:27 am EDT:  The ES headed down after the open, and while the actual low of 1087.75 was within one point of weekly S1 (1088.75), which we said longs needed to support, we did not see the immediate rejection to the upside that would have signalled confidence by the bulls.  Also, the US Dollar Index will likely post a convincing close above resistance today, which will make further equity gains more difficult.  Absent a strong afternoon rally today, our guess is the best swing longs can hope for is sideways action until Friday’s Retail Sales report, which would then need to deliver a bullish surprise–still not the most likely scenario.  1097.75 to 1099.00 remains a preferred day trade sell zone.  If there is an afternoon rally, it would most likely occur after the 1 pm 3 Yr auction.

Still having technical issues with the site…hopefully, we’ll be back on schedule tomorrow morning.

The Precise Take – ES stumbling as US Dollar close to a breakout confirmation

Leaders Analysis:  The focus is on the US Dollar, which is close to a convincing breakout of its downward trend channel. Confirmation of an interim bottom for the USD would be a drag on future equities rallies.  After closing Friday above its moving averages, the EuroYen has sold off overnight, trading well below them.  10 Year and 30 Year Treasury futures have had an oversold bounce since yesterday and are up against first resistance.  All in all, equities bearish, though there is still the possibility of a reversal today. 

Medium Term Analysis:    The window of opportunity for longs to push to new highs is rapidly coming to an end, as tomorrow and Thursday feature important long term Treasury auctions and Friday is Retail Sales.  The latter report marked the high last month and has been a sticking point for rallies throughout 2009.  It will be especially important this month as a bellwether for the all-important December holiday sales, which will likely make or break many retailers.  Perhaps the Black Friday no-interest gimmicks at Best Buy et al worked and the report will be bullish.  Were this to occur, there could be one final short covering rally to end the year with a bang.  So, while this is not the most likely scenario, swing shorts should be alert to this possibility.

Trading Today:  The ES sold off from a large value area overnight and has traded to below the daily S2’s as we write.  If the ES rallies on the open, we would look for shorts around the daily S1’s, which would also include a half gap fill based on the current low, from 1098.00 to 1099.25.  The big hurdle for the longs, however, is the…

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