11:25 am EDT:  The ES broke through today’s value area bounded by 1093.75, and has now exceeded the 1090.00 target and lower end of the expected range.  1087.25 to 1087.75 contains weekly S1 and combined session S1, which longs need to support to keep the prospects for a rally next week alive.  Another reason this level is critical is because SPY is at VWAP anchored from the Nov 2 low, which has supported price twice before. 

10:24 am EDT:  Quiet day so far with a 4 point range defined by the day-session-only pivot of 1094.75 (actual low of 1095.00) and day-session-only R1 at 1099.00, which is the actual day session high.  Accordingly, we’ll stick with the expected range of 1090.00 to 1103.50 as they contain day-session-only S1 and day-session-only R2, respectively.  We have a slight bullish bias and are inclined to believe a test of the upper range, which includes the overnight high will be made.  Watch out for a possible bear trap on a break down of the current 1095.00 low as there is strong support under it down to 1093.75.  If 1093.75 is not supported, we lose the slight bullish bias and a test of the ~1090 area is likely.

The Precise Take – ES maintaining range support on options expiration

Leaders Analysis:   The EuroYen forex cross (as a barometer of global risk appetite) had a very bullish reaction to support overnight, which helps confirm our belief that yesterday’s down move is part of a shakeout of weak equity longs before a move higher.  A close above its 20 day moving average today or Monday would be stronger evidence.  Though the US Dollar and 30 Year T-Bond futures are maintaining yesterday’s big gains, they will probably attract sellers on any more strength and correct a bit early next week, with T-Bonds the weaker of the two.  US Treasuries in general are benefitting from the sovereign risks in Greece and elsewhere, and traders should be sensitive to the possibility that a resolution or exacerbation of the situation could cause immediate volatility.

Medium Term Analysis:    Today is quadruple witching options expiration, so caution is warranted, especially around the open and close.  Next week, however, presents a good opportunity for equity bulls, as the scheduled news should be favorable.  For this scenario, weekly S1 in the ES at 1087.25 needs to hold today.  Day trading opportunities will likely be limited with continuing decreased volatility during the holiday day sessions.  The week after next features a large set of Treasury auctions in the 2, 5 and 7 Year tenors, which will tend to damp equity gains, after which the focus will move to annual earnings in mid-January. 

Trading Today:  The ES had a strong closing 15 minutes yesterday and was able to rally impressively overnight.  Today’s value area is from 1093.75 to 1097.25, and if the ES opens in or near it (as it looks like it will), we don’t have a preferred early trade and will…

Continue reading here.