11:30 am EDT:  As is demonstrated by the below chart, the ES is back to the upper end of its trading range.  Long term volume at price for the Mar 10 contract (not shown) peters out above 1110.50, so if the ES continues to accept value at these levels, chances of breaking the existing range and eventually moving to test at least the 1126 level over the next few days are very good.  From a day trade perspective, both longs and shorts look pretty aggressive here.  The EuroYen never broke up through its 20 day MA and the current high of 1112.00 was made in the first hour, but the ES is accepting at the high end of the multi week range and an afternoon push up is in the cards as long as 1107.00 holds.  That’s about as helpful as we can be now.

9:59 am EDT:  The ES opened near the top of the projected range at 1105.50 and easily pushed through.  This level should now act as support down to 1104.25, below which we would not look for longs.  Ordinarily, we would expect a trend day up, but because of the holidays, we could see the high within the first hour.  1110.50 (combined session R2) and weekly R1 (1111.00) provide a good target.  Shorts remain aggressive, however, until at least 10:30 am and, even after, we would need a good topping pattern to setup up on the short term charts with a small stop.  Also, we would want the EuroYen to  not break its 20 day moving average of 130.444.

The Precise Take – ES to gap open on quiet news day

Leaders Analysis:   The EuroYen forex cross remains strong and has advanced from Friday’s close, but still has not broken the 20 day moving average that has contained it since Dec 8.  Friday we wrote that T-Bonds and the US Dollar would likely correct a bit early this week and that T-Bonds were the weaker of the two.  In fact, T-Bonds have already retraced back to support and the US Dollar is only marginally down, but is demonstrating the potential to put in a topping pattern on the daily chart.  Nasdaq 100 futures are poised to open above resistance (~1813) that has held since mid November.  Early acceptance and a close above this level would help spark the end of year rally that many are waiting for.  All in all, the setup is equities bullish, but with several of the leaders at potential inflection points, we will be watching the EuroYen and NQ in particular over the first hour for confirmation.

Medium Term Analysis:  With no scheduled news today, we’re expecting more of the same low volatility, which will probably continue for at least the remainder of this week and likely the next.  Tomorrow features the third estimate for Q3 GDP, but a major revision is unlikely.  Next week will complete Treasury’s 2009 auctions and supply on deck will be large, which could weigh on equities.

Trading Today:  The ES is up overnight with the high so far of 1104.25 at combined session R1.  Just above is resistance from a high volume level and day-session-only R2 from 1105.25 to 1105.50, which form the upper end of the projected range.  Though we’re expecting low volatility range-bound action, because of the strongly bullish setup in the leaders, we will be more careful with…

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