11:51 am EDT:  All the news has been good today, perhaps a bit too good as it has facilitated a US Dollar rally, which in turn is weighing on equities.  The ES sold off precisely at day-session-only R1 (1093.25) and has now filled the 4:00 pm gap and entered the lower end of the projected range (1079.25 to 1081.25).  If this area does not hold, there is a small but real chance of another selloff like last Friday.  If it does hold, we would not be surprised to see a test of the earlier high.

The Precise Take – January 2010 continues to track October 2009 as month draws to a close

Leaders Analysis:  The leaders have been giving us some head fakes over the last few days.  The US Dollar Index punched through resistance yesterday and convincingly closed above its 200 day moving average and fib resistance and poked above weekly R1 overnight.  It should be able to hit longer term pivot confluence at 79.45 to 79.48.  The EuroYen is looking to put in a bullish reversal day.  Basically, these two are cancelling each other out in terms of an equities directional bias.  The tie breaker, 30 Year T-Bond futures are not telling us anything so, all in all, the leaders are equities neutral.

Medium Term Analysis:  We had previously mentioned the similarity of this month to last October, and the pattern continues roughly, except that the dates are not lining up exactly.  Q3 2009 GDP that month came out on Oct 29, a Thursday, and was reversed the next day.  It was the following Monday that looks like today’s candle (so far).  If the pattern were to continue, we would have an interim low either today or Monday with a sizable rally to follow.  The first two weeks of the month have been bullish since this rally began, so longs will need to assert themselves or risk a much more material correction as it will appear that things are, in fact, different this time.  In fact, delving into the internals and underlying stocks of the index, it does look a bit bleaker this time around.  So, while we have been expecting a bounce for several days now, it is all the more critical that it occur in short order.

Trading Today:  The lower end of today’s projected range is yesterday’s settlement of 1079.25 to yesterday’s high volume level of 1081.25.  The upper end of the projected range is combined session only R1 at 1097.00 to fib resistance at 1098.00; however, we would entertain…

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