11:02 am EDT:  The ES exceeded the expected range.  The 1108.50 upper boundary was yesterday’s settlement, and the actual day-session high today of 1109.25 is a tick above yesterday’s 4:00 pm close.  So, there is still the possibility this is only a gap fill.  If the move up is to continue, we expect 1107.00 to 1107.75 to hold as support.  If it does not, price will likely return to the lower end of the range.

10:07 am EDT:  A whopping 2.75 pt opening range has left little room for opportunity.  The ES had recovered a bit into the open, which negated the possibility of a long into 1105.00.  We’ll stick with the anticipated range from the morning report, which is 1101.25 on the low end and 1107.00 to 1108.50 on the upper end. 

Housing Market Index is a minor market mover at 1:00 pm.

The Precise Take – ES down marginally overnight as interest rates are again in the spotlight

Leaders Analysis:   The US Dollar is up overnight, notably against the Euro as credit problems worsen for some of the EU member states.  The entire yield curve for US Treasuries gapped up on the 8:20 am open, and the Fed’s commercial paper funding facility (CPFF) rate, a proxy for the borrowing rates of companies to fund short term operations, has quietly edged higher since November 27, from 1.13 to 1.18 (unsecured).  Thus, it is becoming more expensive to borrow day by day.

Medium Term Analysis:    All eyes will be on CPI and the FOMC meeting tomorrow.  Statistically, FOMC days gap up and have a bullish edge until about 2:45 to 3:00 pm, whereupon there is profit taking.  CPI could throw a kink into the gap up scenario, however.  Depending upon tomorrow’s outcome, the aforementioned trends in interest rates could be halted temporarily if inflation and tightening expectations are abated; however, this will not cure the credit problems facing the sovereigns, and the trends will likely resume along with the rise of the US Dollar.  This will favor some companies over others, depending upon their trade bias and capital requirements.  It needn’t reverse the US equities rally, but we’re more likely to see low volume and range consolidation days punctuated by sharp moves from time to time (and probably overnight).

Trading Today:  PPI came out inflationary and is weighing on equities.  The ES has found support at the 1102.25 high volume level for the March contract, and is nearing the bottom of the projected daily range of 1101.25, which includes day-session-only S2 and combined session S1.  If this holds into the open, we’re willing to…

Continue reading here.