The Precise Take – Equities flat on CPI, but leaders are warning the bulls

Leaders Analysis:   30 Year T-Bond futures reversed up yesterday and are up nominally overnight.  The US Dollar has reversed upwards and is up materially, and the EuroYen is down materially, having broken strong support.  All in all, the leaders are equities bearish.

Medium Term Analysis:  As we write, CPI came in within expectations and the ES is relatively flat.  With that report behind, the ES has the opportunity to rally into Monday (a US holiday) as long as there is not a downward surprise in Consumer Sentiment today at 9:55 am.  However, the leaders’ bearish stance warrants caution for longs and suggests that any new highs today will be nominal.

Trading Today:  Longs will want to push through today’s value area early, which is from 1143.0 0 to 1145.25, to have a chance at the upper end of the projected range of 1151.00 to 1151.25 (weekly R1 and day-session-only R2).  Otherwise, a run to…

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1:40 pm EDT:  We’re back to find a range day indeed, but very small so far.  However, there are some things worth noting.  First, the early break of yesterday’s high by two ticks and quick 2.25 point retracement was a clue as to a potential bull trap.  Then, the subsequent retracement to 1140.00 was a perfect 76.4% retracement of the premarket low to the day session high.  This less-used fib level is a good clue as to subsequent consolidation in the ES, and equity indexes in general.  The target on the subsequent bounce is the 76.4% retracement of the prior leg, which in this case was 1144.50 (hit as we write this).

The Precise Take – ES flat on Retail Sales ahead of CPI and opex Friday

Leaders Analysis:   30 Year T-Bond futures have not been able to capitalize on Tuesday’s breakout, but have a good chance to rally on a tepid to cold CPI tomorrow.  Also, the 30 Year auction is today, but the auctions this week haven’t been producing much volatility.  The EuroYen is rangebound and not offering much guidance, and the US Dollar is up marginally from yesterday.  All in all, the leaders are equities neutral.

Medium Term Analysis:  Not much to add from yesterday’s commentary, except that the ES had its biggest day-session range since December 4 and intraday volatility is returning as expected. 

Trading Today:  As we write, retail sales for December came in below expectations and jobless claims came in at the upper end of expectations, which should both be bearish for equities.  However, the ES has barely budged, so the bulls appear to remain in control.  If the ES can break above yesterday’s high of 1145.25, there is a good chance of hitting…

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The Precise Take – Equities maintaining on US Dollar weakness

Leaders Analysis:   The EuroYen sold off hard yesterday, but has recovered much of it overnight.  T-Bonds had a large upside day after breaking the trendline we noted yesterday.  Most notably, though, the US Dollar Index broke support and has more room to go to the downside.  This should support equities into Retail Sales tomorrow and gives the leaders’ stance a slight bullish bias as to equities.

Medium Term Analysis:  Things have been relatively quiet this week, but that should end tomorrow as the news tempo picks up significantly and with Friday’s options expiration.  Next week, earnings will be in the spotlight and the week after features an FOMC announcement.  Accordingly, the fate of this rally within a rally will be duked out by the bulls and bears and there should be some big range days into the end of January.

Trading Today:  Yesterday, the ES respected the 1128.75 high volume level (within 3 ticks) and closed over the weekly pivot, so the bulls are maintaining control for the time being.  As we wrote before, the next major high volume level to the downside is not until 1109.00, so a move below 1126.25 has a chance to…  

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12:30 pm EDT:  First confluence support from 1132.25 to 1133.25 has now broken.  We’re still willing to entertain a long from the lower end of the projected range at 1128.50 to 1129.00; however, the chances of it holding are slightly less than if it had been reached earlier.  Accordingly, a long is slightly aggressive.  There’s a 3 Yr auction at 1:00 pm.  Historically, there has tended to be a rebound afterwards, but we don’t yet have hard statistics to confirm this seasonality.

The Precise Take – Equities losing momentum overnight

Leaders Analysis:   The EuroYen forex cross has strongly rejected the ~134.5 resistance area as it has traded down to moving average support overnight.  The US Dollar has struggled to make a corresponding up move, though it is respecting support.  30 Year T-Bond futures are at the upper end of a trading range and have broken out of the downwards trend channel only by moving sideways.  However, if they can close above 116’5, they have a chance to move to at least 118 to 118’16.  Long term Treasury auctions over the next three days can provide volatility.  All in all, the leaders have turned from equities bullish yesterday to slightly equities bearish today.

Medium Term Analysis:  Equities have lost some momentum during the light news period that extends into tomorrow.  Given the leaders stance, sideways to downside action is more likely until we get a bullish catalyst.  Retails Sales Thursday and CPI Friday have a chance to provide this, but they could also just as easily be bearish.

Trading Today:  The ES is down just over 10 points overnight, the weakest overnight performance since Dec 17 09.  After an extended move up, the day session that follows this pattern usually has a nominal new low with a high at or below the day’s value area.  The ES has traded to just above strong pivot confluence from the weekly pivot at 1132.25, monthly R1 at 1132.75, and daily S2 at 1133.25.  We will consider a long from this area, but will wait…

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The Precise Take – Equities to gap up Monday, on schedule

Leaders Analysis:   Overnight, the EuroYen advanced to the early Dec 08 pivot high and the US Dollar Index gapped down through ~77 support and is now testing the 61.8% retracement (76.84) of the breakout from the 75.88 level.  If support breaks, a retest of the large congestion area of 74.17 to 75.88 is likely.  This would allow for an easy continuation of the move up in equities.  Also, the Nasdaq 100, which had been lagging, finally caught up Friday.  All in all, the leaders are strongly equities bullish, though there is a possibility of a reversal here given the stance of the US Dollar Index and the EuroYen.  This would not necessarily lead to a reversal in equities, but would make large material gains less likely.

Medium Term Analysis:  There is little way in terms of scheduled news until Thursday’s Retail Sales and Friday’s CPI, though Alcoa kicks off earnings season after the close today.  Friday is also options expiration.  If the longs are going to continue the run-up, they have little resistance through Wednesday. 

Trading Today:  Friday, the ES was able to close on a strong note at the upper end of the projected range, and has continued the move overnight up to just shy of day-session-only R2.  Given the bullish seasonality of Mondays recently, the ES should be able to reach…

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The 114.18 high volume level has now been reached.  In the chart below it does not appear to be a high volume level because the area between 111.15 to 114.18 has recently been filled in.  The next target is 116.17; however, a drop back to 111.15 is possible if SPY stalls here.

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10:10 am EDT:  The ES opened at the daily pivots and the pre-market low has held.  The upper end of the projected range of 1141.75 remains the same and, to the downside, 1130.00 to 1130.50 (daily S1s) should now hold.  This is the quietist employment Friday in some time and we expect it will remain that way for the balance of the day.

The Precise Take – Employment Report disappoints—can equities hold on?

Leaders Analysis:   The leaders will probably make substantial moves today, so analysis prior to the report will not carry much weight.  Notably, 30 Year T-Bonds are finally breaking to the upside.  The close will be important.

Medium Term Analysis:  See yesterday’s two studies regarding seasonality.  Monday has been opening flat to up with follow through during the day.  If it does not, the week has less of a chance of continuing the up move.  The tendency of Employment Situation Fridays to mark interim tops or congestion periods also adds to this possibility.  Should Monday be strong, however, the lack of news into Wednesday may provide the opportunity for material new highs.  A lot depends on the Employment Situation report today and how the markets react to it.  Enough volume has traded this week to establish 1128.75 as the highest volume level for the Mar 09 ES contract.  This should act as strong support.  Next major volume support is not until 1109.00.  This means the next down move likely will be swift. 

Update:  As we write, the Employment report has disappointed.  This actually makes the prospects for continuation of the rally better.  If the ES can advance today or at least close above 1128.75, we will become much more bullish over the medium term than we would have had it advanced on a good number. If 1126.25 in the ES gives today, we could see a large selloff.

Trading Today:  The upper end of the projected range is 1141.00 to 1141.75, which includes the daily R1s and weekly R3.  The lower end is volume support and yesterday’s lows, from 1126.25 to 1128.50.  If there’s a move down into the lower projected range into the open…

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