1:29 pm EDT:  After we posted the last update, the ES made a quick ascent and reached the upper end of the new projected range (actual high of 1095.25), where there was expected profit taking.  Large prop traders like to move the ES in 5 or 10 (preferred) point increments, so after 1085.00 was respected to the tick and there were some visible buying spurts after a retest, it was a good bet that we would see 1095.00.  Confluence resistance there in the form of the combined session pivot, day-session-only R1, and the upper end of yesterday’s market profile value area made it likely that the ES would not be able to push through absent larger institutional support.  Institutional [support] did in fact not materialize and the ES is now testing the lower end of the day’s range. 

The 10 Yr auction disappointed, which suggests that equities will remain under pressure until after the 30 Yr auction tomorrow at 1 pm.  We’re willing to play that the existing day session range will hold, but will not attempt to fade against the market should it break.

10:39 am EDT:  The ES opened in the value area of 1090.00 to 1091.75 that longs needed to support.  Shortly thereafter, it traded below, finally finding support near the confluence of last week’s low and a fib retracement (actual low 1085.00).  The original value area is now acting as resistance, but on the most recent decline, there was a buying spike when price hit 1086.50.  Volume is below average and internals are negative, butwhich don’t suggest a trend day.  We expect the ES to tread water ahead of the 1pm auction with a possible range of about 1085 to 1095.  If day-session-only S2 is broken at 1082.00, a selloff could develop momentum.

The Precise Take – ES holding critical support ahead of long term Treasury auctions.

Leaders Analysis: We’re watching 10 Yr T-Notes and 30 Yr T-Bond futures closely, as they eased down off resistance yesterday (and their yields off support), in spite of a good 3 Yr auction and a strong US Dollar.

Medium Term Analysis: We wanted 1088.75 (weekly S1 in the ES) to hold on the close to support the swing long case and it did, barely, with an overnight high equal to yesterday’s day session high.  The Fed continues to hint of tightening and conducted another tri party repo to test its liquidity draining functionality.  Combined with long term yields that are still up near resistance, this suggests that equities are likely to be under pressure until at least after today’s 1:00 pm 10 Yr auction, and quite likely tomorrow’s 30 Yr auction.

Trading Today:  We will be rolling into the Mar 10 contract this week, likely tomorrow, but today’s number are still basis Dec 09.  Longs should defend the value area of 1090.00 to 1091.75, which contains yesterday’s settlement, yesterday’s point of control, long term point of control and the day-session-only pivot.  If the ES trades below 1090.00, longs become…

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